How is exchange rate determined under purchasing power parity theory?

Question

26 Apr 2025

Answer :

Word Count : 294

Under the Purchasing Power Parity (PPP) theory, the exchange rate between two currencies is determined by the relative price levels of a specific basket of goods and services in different countries. This theory suggests that in the long run, the exchange rate between two currencies should move towards a rate that would make the price of an identical ___ _________ __________ ___ ____ ________ ___ ________ ___ ________ _______.
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