Question

Please from your own words and no Plagiarism and please right your answer here and write here on your hand not in outside papers.

Discuss in detail the theory of Purchasing Power Parity.? Discuss?

Answer 1

Purchasing power parity is the difference between purchasing ability of same goods of two currencies. For example, it is the cost of purchasing a basket comprised of different goods. So it is the cost of a basket which could be comprised of banana, apple, milk and other goods which are consumed by two nations. If a nation has to spend more currency in order to buy the basket then its purchasing power is less when compared with the other currency.
Using the purchasing power parity, the value of currencies can be determined in order to find an exchange rate between two currencies of two different nations.