The idea that the value of money is equal across countries is known as
A) exchange rate parity.
B) purchasing power parity.
C) interest rate parity.
D) the expected profit parity effect.

Question

Quizplus · Accepted Answer

The idea that the value of money is equal across countries is known as purchasing power parity. This means that the exchange rate between two currencies should equal the ratio of the two countries' price levels of a basket of goods and services. Exchange rate parity (A) refers to the equality between the spot exchange rate and the forward exchange rate, while interest rate parity (C) refers to the idea that the difference in interest rates between two countries should equal the expected change in their exchange rates. The expected profit parity effect (D) is not a commonly used term in economics.

The Idea That the Value of Money Is Equal Across