Which of these is the relative ability of two countries' currencies to buy the same "basket" of goods in those two countries?

Question

Quizplus · Accepted Answer

Purchasing power parity (PPP) is the relative ability of two countries' currencies to buy the same "basket" of goods in those two countries. PPP is based on the idea that in the long run, exchange rates should move towards the rate that would equalize the prices of an identical basket of goods and services in any two countries. The Fisher effect is a theory that suggests that real interest rates are independent of monetary measures such as inflation, whereas the Law of one price states that identical goods in different countries should have the same price when expressed in the same currency. Cross rates are currency exchange rates between two currencies that do not involve the US dollar.

Which of These Is the Relative Ability of Two Countries