Absolute purchasing power parity means
A) real exchange rates equal the purchasing power in each country.
B) nominal exchange rates equal the purchasing power in each country.
C) real exchange rates are less than the purchasing power.
D) nominal exchange rates are less than the purchasing power.

Question

Quizplus · Accepted Answer

Absolute purchasing power parity holds that the nominal exchange rates between currencies are equal to the ratio of the countries' levels of prices. This means that a unit of currency in one country should buy the same quantity of goods in another country when converted at the nominal exchange rate.

Absolute Purchasing Power Parity Means