ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -Purchasing power parity (PPP) is the idea that goods in one country will cost the same in another country, once their exchange rate is applied. According to this theory, two currencies are at par when a market basket of goods is valued the same in both countries.

Detailed explanation-2: -Purchasing power parity (PPP) is an economic theory of exchange rate determination. It states that the price levels between two countries should be equal. This means that goods in each country will cost the same once the currencies have been exchanged.

Detailed explanation-3: -The theory of purchasing power parity states that exchange rates between any two currencies will adjust to reflect changes in the price levels of the two countries. If one country’s price level rises relative to another’s, its currency should depreciate (the other country’s currency should appreciate).

Detailed explanation-4: -The purchasing power parity theory was propounded by Professor Gustav Cassel of Sweden. According to this theory, rate of exchange between two countries depends upon the relative purchasing power of their respective currencies. Such will be the rate which equates the two purchasing powers.

Detailed explanation-5: -THE PURCHASING POWER PARITY The purchasing power parity theory was propounded by Professor Gustav Cassel of Sweden. According to this theory, rate of exchange between two countries depends upon the relative purchasing power of their respective currencies.