The-definition.com

Definition

Absolute form of purchasing power parity

Absolute form of purchasing power parity is a theory that explains how inflation differentials affect exchange rates. It suggests that prices of two products of different countries should be equal when measured by a common currency.


 

Absolute form of purchasing power parity is a theory that prices of products of two different countries should be equal when measured by a common currency. Also called the "law of one price."

Share it:  Cite

More from this Section

  • Law of large numbers
    Law of large numbers is the concept that seemingly random events will follow predictable ...
  • Callable Swap
    A callable swap provides the party making the fixed payments with the right to terminate ...
  • Note
    Note is a written contract between a borrowing customer and a bank describing the responsibilities ...
  • Margin requirement
    Margin requirement refers to deposit placed on a contract (such as a currency futures ...
  • Reporting form
    Reporting form coverage for commercial property insurance that requires the insured to ...