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|| economics and management |||

While comparing financial conditions, standard of living, relative price level of two countries, often one may come to stumble on PPP or "Purchasing Power Parity". So what does PPP mean? It is a kind of theory based on the longterm equilibrium exchange rates based on relative price levels of two countries.

The theory is based on the "law of one price" which states that if their is no transaction costs, identical goods will have the same price in different markets.

There is mainly two versions of PPP.

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