The theory of purchasing-power parity states that a unit of any given currency should be able to buy the same quantity of goods in all countries.

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The theory of purchasing-power parity (PPP) suggests that the exchange rate between two countries should equal the ratio of the two countries' price levels for a given basket of goods and services. This implies that a unit of any given currency should be able to buy the same quantity of goods in all countries.

The Theory of Purchasing-Power Parity States That a Unit of Any