Purchasing power parity means that the expected exchange rate is such that the returns from investing in two nations are equal.

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Purchasing power parity (PPP) is an economic theory that compares different countries' currencies through a "basket of goods" approach, suggesting that in the absence of transaction costs and other factors, identical goods should have the same price in different countries when prices are converted into a common currency. It does not directly relate to the returns from investing in two nations being equal.

Purchasing Power Parity Means That the Expected Exchange Rate Is