Article Writing Homework Help

Hi, I am looking for someone to write an article on exchange rate and puchasing power parity theory Paper must be at least 1000 words. Please, no plagiarized work! Here, we will take a look at the concept that is the purchasing power parity and try to understand its implications on the currency exchange rates in the world.

The best simplest way to describe Purchasing Power Parity, denoted by PPP, is by directly going into its application. So, PPP of the Gross Domestic Product for the countries around the world as of 2003, where we use the American economy as our base group and assign it a value of 100 would see the highest index value being appropriated to Bermuda i.e. 154. This basically means that goods that are sold in the Bermuda are 54% times more expensive as compared to those in United States. Now, the purchasing power parity theory makes use of the long term equilibrium exchange rate that exists between these two currencies in order to equalize the purchasing abilities of both the said currencies. This theory has been developed by the works of Gustav Cassel in 1920 and to put it in simplest terms, it is fundamentally the law of one price: the theory goes along the lines that in completely ideal and efficient markets, identical goods must have the same price regardless of the currency used in the purchase of goods.

By equalizing the purchasing power of different currencies in their home countries for a given basket of goods for different currencies, we can ascertain the purchasing power SEM rate.