Purchasing-power parity

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Purchasing-power parity is the doctrine according to which goods must sell for the same price in every country, implying that the nominal exchange rate reflects differences in price levels.

Definition

According to Macroeconomics by Mankiw (7th edition),

Purchasing-power parity. The doctrine according to which goods must sell for the same price in every country, implying that the nominal exchange rate reflects differences in price levels.
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