Purchasing power parity holds if

Question

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Purchasing power parity holds when the prices of all goods in the world economy are equal when corrected for nominal exchange rates. This means that the exchange rate between currencies reflects the actual purchasing power of each currency. In other words, a person should be able to buy the same amount of goods and services with the same amount of money, regardless of which country they are in. While inflation and real wage rates can be factors in purchasing power, they are not the defining characteristics of purchasing power parity.

Purchasing Power Parity Holds If