The theory of purchasing power parity is a theory of how exchange rates are determined in

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The theory of purchasing power parity is a theory of how exchange rates are determined in the long run. It suggests that over time, the exchange rate between two currencies should adjust until the price of an identical basket of goods is the same in both countries. In the short run, other factors such as speculation, political events, and changes in interest rates can affect exchange rates.

The Theory of Purchasing Power Parity Is a Theory of How