Purchasing power parity suggests that interest rates in different countries will adjust so that each currency will have the same purchasing power.

Question

Quizplus · Accepted Answer

Purchasing power parity (PPP) suggests that in the long run, exchange rates between currencies will adjust so that the same basket of goods will have the same price in different countries, not that interest rates will adjust for this purpose.

Purchasing Power Parity Suggests That Interest Rates in Different Countries