If purchasing power parity tells us that if the exchange rate is a pound for a dollar, then price of a haircut in London should cost the same as a haircut in Toronto.

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Purchasing power parity (PPP) suggests that in the long run, exchange rates should adjust so that identical goods cost the same in different countries when priced in a common currency. However, it doesn't imply that specific services like haircuts, which are influenced by local factors, will have the same price.

If Purchasing Power Parity Tells Us That If the Exchange