ECONOMICS
GDP
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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all country’s currencies are different
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all country’s currencies and exchange rates are put on the same level in US dollars.
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Either A or B
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None of the above
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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: -The rate at which the currency of one country would have to be converted into that of another country to buy the same amount of goods and services in each country.
Detailed explanation-3: -What is Purchasing Power Parity? Purchasing power parity (PPP) is a theory which states that exchange rates between currencies are in equilibrium when their purchasing power is the same in each of the two countries.
Detailed explanation-4: -One of the most prominent theories of how exchange rates are determined is the theory of purchasing power parity (PPP). It states that exchange rates between any two currencies will adjust to reflect changes in the price levels of the two countries.
Detailed explanation-5: -The purchasing power parity (PPP) exchange rate is the exchange rate between two currencies which would equate the two relevant national price levels if expressed in a common currency at that rate, so that the purchasing power of a unit of one currency would be the same in both economies.