The real exchange rate is equal to one when absolute PPP holds.

Name: The real exchange rate is equal to one when absolute PPP holds.
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Question

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Absolute PPP states that the price level of a basket of goods in one country should be equal to the price level of the same basket of goods in another country when both prices are expressed in the same currency. If absolute PPP holds, then the real exchange rate would be equal to one.

The Real Exchange Rate Is Equal to One When Absolute