Relative Purchase Power Parity

DEFINITION of 'Relative Purchase Power Parity'

An expansion of the purchase power parity theory, which suggests that prices in countries vary for the same product but that they differ by the same proportional rate over time. The reasons suggested for this price difference include taxes, shipping costs and differences in product quality.

BREAKING DOWN 'Relative Purchase Power Parity'

The relative purchase power parity condition suggests that countries with higher rates of inflation will have a devalued currency.

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RELATED FAQS
  1. How important a metric is PPP (purchasing power parity?)

    Find out why calculations and comparisons of the purchasing power parity (PPP) in different countries can have a real impact ... Read Answer >>
  2. Is risk parity a safe investment strategy?

    Learn how risk parity funds won't blow away the market, but will grow steadily over time by using the time-tested strategies ... Read Answer >>
  3. What are the nations with the highest PPP (purchasing power parity) with respect ...

    Learn which nations have the highest PPP with respect to the U.S. while reviewing the differences of calculating GDP in market ... Read Answer >>
  4. Why is PPP (purchasing power parity) controversial?

    Find out why economists disagree about the conceptual validity of the theory of purchasing power parity (PPP) to describe ... Read Answer >>
  5. What are the nations with the lowest PPP (purchasing power parity) with respect to ...

    Learn how purchasing power parity (PPP) is used to compare the price of goods between countries, and which countries have ... Read Answer >>
  6. What is the difference between GDP and GDP accounting for PPP (purchasing power parity)?

    Learn how to distinguish between absolute GDP and GDP after accounting for purchasing power parity, or PPP, when comparing ... Read Answer >>
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