The adjustment in exchange rate conversions that takes into account differences in the true cost of living across countries is called
A) nominal purchasing power.
B) purchasing power parity.
C) raw purchasing power.
D) currency-adjusted purchasing power.

Question

Quizplus · Accepted Answer

Purchasing power parity takes into account the differences in the true cost of living across countries by adjusting exchange rates. Nominal purchasing power does not adjust for these differences and simply looks at exchange rates without considering the relative cost of goods and services. Raw purchasing power and currency-adjusted purchasing power are not commonly used terms in economics.

The Adjustment in Exchange Rate Conversions That Takes into Account