Which of the following statements about the purchasing power parity theory of exchange rates is INCORRECT?

Group of answer choices:

A The real exchange rate is constant if relative purchasing power parity applies.

B The currencies of low income countries tend to be overvalued, compared to the predictions of purchasing power parity theory.

C Real exchange rates tend to mean revert in the long run.

D Purchasing power parity will not apply if there are significant transactions costs involved in international trade.

E The real exchange rate is 1 if absolute purchasing power parity applies.