Purchasing power parity is where the exchange rate between the currencies of two countries makes the purchasing power of both currencies equal.

Question

Quizplus · Accepted Answer

Purchasing Power Parity (PPP) is an economic theory that compares different countries' currencies through a "basket of goods" approach. According to PPP, in the absence of transaction costs and other barriers, the exchange rate between two countries' currencies should equalize the price of a basket of goods between the two countries, making the purchasing power of both currencies equivalent.

Purchasing Power Parity Is Where the Exchange Rate Between the Currencies