Economics · Purchasing Power Parity
The Purchasing Power Parity (PPP) theory states that:
Verified Solution4 OptionsUpdated: October 2026👁️1 View
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- 1The exchange rate depends solely on the interest rate differential between two countries.
- 2The exchange rate between the currencies of two countries should equal the ratio of their real GDP levels.
- 3The exchange rate between the currencies of two countries should equal the ratio of their gold production.
- 4The exchange rate between the currencies of two countries should equal the ratio of the countries' price levels.✓
Correct answer
The exchange rate between the currencies of two countries should equal the ratio of the countries' price levels.
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