Question

which of the following is incorrect? exchange rates in the short run are much more variable than inflation differentials deviations from ppp are much more apparent for monthly data than annual ppp holds best in the long run international economists always assume that ppp holds. none of the above

Explanation:

Purchasing - Power - Parity (PPP) is an economic concept. Exchange rates are more volatile in the short - run compared to inflation differentials. Deviations from PPP are more visible in monthly data than annual. PPP holds better in the long - run. However, international economists do not always assume PPP holds as there are many factors like transaction costs, non - tradable goods, etc. that can cause deviations.

Answer:

international economists always assume that PPP holds.