What effect do non-tradable goods have on PPP? What will be an ...

[BRWH]

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]

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

[BRWH]

Great answer, keep it coming

[kthug]

Thanks for the timely response, appreciate it