Which is the theory that suggests that the exchange rate will adjust so that the prices of goods in different countries are the same?

Question

Quizplus · Accepted Answer

Purchasing power parity (PPP) is the theory that suggests that the exchange rate will adjust so that the prices of goods in different countries are the same. PPP is based on the idea of the law of one price, which states that the same good should have the same price in different markets when expressed in the same currency, taking into account any transaction costs.

Which Is the Theory That Suggests That the Exchange Rate