Purchasing power parity holds if

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Purchasing power parity holds when the prices of all goods in the world economy are equal, corrected for nominal exchange rates. This means that if exchange rates are adjusted for the relative differences in price levels, then goods should cost the same across all countries. This theory assumes that transportation costs and trade barriers do not exist, and that markets are competitive. In reality, PPP is not a perfect theory, but it provides a useful benchmark for comparing income levels and living standards across countries.

Purchasing Power Parity Holds If