The theory that states that if the exchange rates of two countries are in equilibrium, a product purchased in one will cost the same in the other, expressed in the same currency is referred to as:

Question

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The theory of purchasing power parity (PPP) asserts that when exchange rates between two countries are in equilibrium, the cost of a good or service in one country should be equivalent to the cost of the same good or service in the other country, when both are expressed in the same currency. This theory is used to compare the standard of living between different countries, as it accounts for differences in cost of living and currency exchange rates. Options A, B, D, and E relate to different economic concepts and theories, but are not directly related to the concept of PPP.

The Theory That States That If the Exchange Rates of Two