How is exchange rate determined under purchasing power parity theory?

Question

21 Feb 2025

Answer :

Word Count : 264

The Purchasing Power Parity (PPP) theory states that the exchange rate between two currencies is determined by the relative purchasing power of those currencies. It suggests that in the long run, the exchange rate should adjust so that a basket of goods and services costs the same in both countries when priced ________ _____ ____ ____ ______ __________ __________ ________ _________ _________.
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