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Purchasing Power Parity and Arbitrage

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Explain the difference/similarities (if any) between Purchasing Power Parity (PPP) and Arbitrage.

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Solution Summary

Differences and similarities between purchasing power parity and arbitrate are discussed in a structured manner in this response. The related references are also provided

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The similarities between purchasing power parity and arbitrage are that both PPP and arbitrage can refer to foreign exchange rates.

The purchasing power parity compares different countries' currencies through a method called the basket of goods.
This metric enables analysts to compare different countries' currencies, permits analysts to compare living and economic productivity standards among countries, and allows some countries to adjust their GDP to ...

Solution provided by:
Hatim Baxamusa, MBA
Education
  • BSc , University of Calcutta
  • MBA, Eastern Institute for Integrated Learning in Management
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