According to purchasing-power parity theory,the nominal exchange rate between the U.S.and another country should equal the price level for that country divided by the price level for the U.S..

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According to purchasing-power parity theory, the nominal exchange rate between two countries should equal the ratio of their respective price levels. Specifically, the exchange rate should equal the foreign price level divided by the domestic price level. This ensures that a given basket of goods will cost the same amount in both countries, once the exchange rate is taken into account.

According to Purchasing-Power Parity Theory,the Nominal Exchange Rate Between the U.S.and