Purchasing power parity
Purchasing power parity is a concept that implies that the level of exchange rates adjusts so that identical goods cost the same in different countries. Sometimes referred to as the “law of one price.”
Definitions
According to Financial Management Theory and Practice by Eugene F. Brigham and Michael C. Ehrhardt (13th edition),
- Purchasing power parity. Implies that the level of exchange rates adjusts so that identical goods cost the same in different countries. Sometimes referred to as the “law of one price.”
According to Fundamentals of Financial Management by Eugene F. Brigham and Joel F. Houston (15th edition),
- Purchasing power parity (PPP). The relationship in which the same products cost roughly the same amount in different countries after taking into account the exchange rate.
According to Principles of Economics by Timothy Taylor (3rd edition),
- Purchasing power parity (PPP). The exchange rate that equalizes the prices of internationally traded goods across countries.
Related concepts
- Financial management. A combination of enterprise efforts undertaken in order to procure and utilize monetary resources of the enterprise.
