Category: Macroeconomics

Art of Balance, by Ilya Zomb

Purchasing Power Parity; hey look, a balance

  Our willingness to pay a certain price for foreign money must ultimately and essentially be due to the fact that this money possesses a purchasing power as against commodities and services in that country. On the other hand, when we offer so and so much of our own money, we are actually offering a purchasing power as against commodities and services in our own country. Our valuation of a foreign currency in terms of our own, therefore, mainly depends on the relative purchasing power of the two currencies in their respective countries.  Abnormal Deviations in International Exchanges, Gustav Cassel,...