Question

Does the theory of purchasing power imply that a dollar will have the same purchasing power as one unit of a foreign nation’s currency?

Answer 1

NO, the PPP implies that same basket of good will cost the same across the nations in their respective currency i.e. the purchasing power of dollar will be equivalent to the purchasing power of the foreign currency in there country.

for example, a basket of good cost $10 in the US and as per the current exchange rate $1 = 10 Euro,the the same basket will cost 100 Euro in the Eurozone area. i.e the purchasing power of the dollar will be the same after the exchange.