Many economists believe that the theory of purchasing-power parity describes the forces that determine exchange rates in the long run.

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Purchasing-power parity (PPP) theory posits that in the long run, exchange rates should adjust so that an identical good in two different countries has the same price when expressed in a common currency. This theory is widely accepted among economists as a fundamental principle that explains long-term determinants of exchange rates.

Many Economists Believe That the Theory of Purchasing-Power Parity Describes