The purchasing power parity theorem implies that the real exchange rate between two currencies equals one to one.

Name: The purchasing power parity theorem implies that the real exchange rate between two currencies equals one to one.
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The purchasing power parity (PPP) theorem suggests that in the long run, exchange rates should adjust so that identical goods cost the same in different countries, implying a real exchange rate of one.

The Purchasing Power Parity Theorem Implies That the Real Exchange