The concept of purchasing power parity implies that the:

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The concept of purchasing power parity (PPP) suggests that in the absence of trade barriers and transportation costs, the exchange rate between two currencies should equal the ratio of the prices of a basket of goods and services in the two countries. The Big Mac Index, published by The Economist, is a well-known example of using PPP to compare prices of a single product (Big Mac) across different countries. The idea is that if the exchange rate is out of line with what PPP suggests, then one currency is overvalued or undervalued relative to the other. Therefore, according to PPP, the Big Mac should cost about the same (in local currency terms) in all countries, assuming the same quality and quantity of ingredients and similar production and delivery costs.

The Concept of Purchasing Power Parity Implies That The