Purchasing power parity is the theory that states that changes in relative prices between countries are determined by changes in the exchange rate.

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Purchasing Power Parity (PPP) is the economic theory that states that the exchange rate between two currencies is equal to the ratio of the currencies' respective purchasing power. It does not claim that changes in relative prices are determined by changes in the exchange rate; rather, it suggests that in the long run, exchange rates should adjust to equalize the price of identical goods and services in any two countries.

Purchasing Power Parity Is the Theory That States That Changes