Author Question: What effect do non-tradable goods have on PPP? What will be an ideal ... (Read 78 times)

BRWH · **on:** Jun 30, 2018

What effect do non-tradable goods have on PPP?

What will be an ideal response?

Question 2

Eurodollar deposits arising from OPEC trade surpluses are called

A) OECD-dollars.
B) OPEC-dollars.
C) petrodollars.
D) None of the above.

akpaschal · **Reply #1 on:** Jun 30, 2018

Answer to Question 1

The effect is quite substantial.
In 2006, the output of non-tradable goods accounted for about 46 of U.S. GNP. Along with haircuts, non-tradable goods include routine medical treatment, housing etc. For the most part, non-tradable goods are comprised of services, and the output of the construction industry. Non-tradable help explain much of the wide departure from PPP that is present in empirical data.

Answer to Question 2

C