Question

purchasing power parity meaning

Answer 1

hey
Purchasing power parity  is a economic theory that states that the exchange rate between two countries is equal to the ratio the currencies respective purchasing power

Answer 2

Answer:

Explanation: Purchasing power parity is a prominent exchange rate that enables one to purchase the same quantum of goods and services in every country. It is widely used by macroeconomic pundits to analyse economic productivity and living standard between countries.

It is just a theoretical rate as none of the country follows it. It is used worldwide by the Government agencies just to analyse the output of countries that use different exchange rates.It thus help in getting familiar with the data and also analyse it of each country.

Example: Suppose  a pair of sandals costs Rs 2400 in India. Then it should cost $40 in US given the the exchange rate is Rs 60 to a dollar.