What is Purchasing Power Parity (PPP) and Interest Rate Parity (IRP)? Discuss the reasons for deviation of PPP relationship and IRP relationship.

Purchasing Power Parity (PPP) and Interest Rate Parity (IRP) are two fundamental concepts in International Financial Management, used to explain the relationships between exchange rates, price levels, and interest rates across countries.

Purchasing Power Parity (PPP) is a theory that states that in the long run, exchange rates between two currencies should adjust so that identical goods cost the same in both countries when priced in a common currency. In other words, the exchange rate between two countries should equal the ratio of their price levels. PPP helps to measure the relative value of currencies and is used to compare economic productivity and living standards across countries. There are two main forms of PPP: absolute PPP, which directly compares price levels, and relative ___ _________ ____ ______ __________ _________ __________ ______.
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