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Purchasing power parity theory |
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Purchasing power parity theoryA theory of the exchange rate that the rate will adjust to achieve purchasing power parity, in either its absolute or its relative form.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 riskPurchasing power riskRelated: Inflation risk 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 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 credit available for credit trading in a credit, after taking credit into consideration. Further SuggestionsPurchasing powerPurchasing power of the dollar Purchasing power parity Relative form of purchasing power parity Absolute form of purchasing power parity |
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