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Absolute form of purchasing power parity |
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Absolute form of purchasing power parityA theory that prices of products of two different countries should be equal when measured by a common currency. Also called the "law of one price."Absolute form of purchasing power parity Similar MatchesPurchasing powerPurchasing powerThe amount of goods and services which can be purchased by a given unit of currency after taking into account the effect of inflation. Purchasing power can be assessed by tracking an index of consumer prices and comparing different periods, for example the early 1990s and the current time. Inflation will result in reduced purchasing power over a period of time. Purchasing power parity exchange ratePurchasing power parity exchange rateAn exchange rate calculated to yield absolute purchasing power parity. Useful for making comparisons of real values (wages, GDP) across countries with different currencies. Since the purchasing power parity theory is rarely correct, this contrasts with the nominal exchange rate. Purchasing powerPurchasing powerThe amount of goods that money will buy, usually measured (inversely) by the CPI. Purchasing power parityPurchasing power parityThe notion that the ratio between domestic and foreign price levels should equal the equilibrium exchange rate between domestic and foreign currencies. Purchasing power riskPurchasing power riskRelated: Inflation risk Further SuggestionsPurchasing power of the dollarPurchasing power Purchasing power parity theory Purchasing power parity Relative form of purchasing power parity |
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