One factor affecting change in currency values is different price levels in different countries for the same goods and services.

Question

Quizplus · Accepted Answer

This is known as the purchasing power parity theory, which suggests that exchange rates should adjust in order to equalize the prices of similar goods and services in different countries. If the price of a product is higher in one country than in another, then the currency of the country with the higher price will likely depreciate against the currency of the country with the lower price.

One Factor Affecting Change in Currency Values Is Different Price