Purchasing Power Parity theory is related with ________.

interest rate

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bank rate

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wage rate

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exhange rate

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Solution

The correct option is D exhange rate
The acronym PPP stands for, "Purchasing Power Parity". It is a method of currency valuation that tells us that the exchange rate between two countries must be equal to the ratio of the currencies' respective purchasing power, i.e., two identical goods should eventually cost the same in different countries once adjusted for purchasing power parity.

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