Purchasing power Parity

Brief Principles of Macroeconomics (MindTap Course List)
8th Edition
ISBN:9781337091985
Author:N. Gregory Mankiw
Publisher:N. Gregory Mankiw
Chapter13: Open-economy Macroeconomics: Basic Concepts
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Q) Discuss the effect of Purchasing power Parity and Interest Rate Parity on Exchange Rates

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Purchasing Power Parity is the difference between price level of good in one country and the price level of the same product in another country is because of the foreign exchange rate between both the countries. The foreign exchange rates should be estimated on the related prices so that the interest rate can be concentrated and the estimation can be done between both the nations. 

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