The equivalence of the exchange rate to the ratio of price levels between two countries is referred to as the:

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The equivalence of the exchange rate to the ratio of price levels between two countries is known as Absolute Purchasing Power Parity (PPP). It means that the exchange rate between two currencies should reflect the relative price levels of the two countries. For instance, if Country A has a higher price level than Country B, the exchange rate should adjust so that it costs the same to buy goods in both countries. However, in reality, the exchange rates do not always follow absolute PPP due to various factors like transaction costs, taxes, and other barriers to trade.

The Equivalence of the Exchange Rate to the Ratio of Price