Under the gold standard, the calculation of each currency's par value was based on the concept of ________.

Question

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Under the gold standard, the calculation of each currency's par value was based on the concept of purchasing power parity, which means that the exchange rate between two currencies should be equal to the ratio of the two countries' price levels. This was used as a way to ensure that currencies were backed by equivalent amounts of gold.

Under the Gold Standard, the Calculation of Each Currency's Par