Exchange rate changes tend to reflect international differences in inflation rates.What is the name of this theory?

Question

Quizplus · Accepted Answer

The purchasing power parity theory suggests that exchange rate changes are driven by differences in inflation rates between countries. If one country has higher inflation than another, its currency will depreciate relative to the other country's currency in order to maintain equilibrium in purchasing power.

Exchange Rate Changes Tend to Reflect International Differences in Inflation