_________ is the theory that the price of internationally traded commodities should be the same in every country,and hence the exchange rate between the two currencies should be the ratio of prices in the two countries.

Question

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Purchasing Power Parity (PPP) is the theory that suggests that the exchange rate between two countries should equal the ratio of the two countries' price level of a basket of goods and services. This implies that if the price of a good is lower in one country than another after converting into a common currency, the currency of the first country is undervalued, and vice versa.

_________ Is the Theory That the Price of Internationally Traded