Exchange rates usually change precisely as suggested by the purchasing power parity (PPP)theory.

Question

Quizplus · Accepted Answer

While the purchasing power parity (PPP) theory provides a long-term equilibrium exchange rate between two currencies based on their relative purchasing powers, in reality, exchange rates fluctuate due to a variety of factors such as interest rates, political stability, and market speculation, and do not always align precisely with PPP predictions.

Exchange Rates Usually Change Precisely as Suggested by the Purchasing