What is meant by purchasing power parity?

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What is meant by purchasing power parity?

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What is meant by purchasing power parity?

Explanation & AnswerSolution by a verified expert

Explanation

Purchasing power parity, or the law of one price, is a relationship that says that the same products should cost the same in every country after converting the local currency to foreign currency. For example, if a set of golf balls costs $10 in the US and 1 US dollar equals 70 Indian rupees, the set should cost 700 rupees in India.

Verified Answer

The same products should cost the same in every country after currency conversion.

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