Reply with at least 150 words in text citation and reference The parity of purchasing power (PPP) is the concept that will focus on the supposed exchange rate in such a way that it is necessary to pre

Reply with at least 150 words in text citation and reference

The parity of purchasing power (PPP) is the concept that will focus on the supposed exchange rate in such a way that it is necessary to preserve one price law. The average exchange rate between the two countries will be a fair one if the purchasing power parity holds a stronger value equal to that of the other nations. Let's take the Big Mac index from the US and Brazilian info. 4.33, which is per 1 US dollar, is focused on local currency rates for US Big Macs. Although the Brazil-based value is 10.08, based on Brazil's local currency, it is 3 times higher than the US dollar-based value of 1 US dollar. We may also presume that between different countries, the Big Mac index varies. In contrast to both countries, the US and Brazil, purchasing power's parity determines the potential standard of living, which could mean that the potential standard of living in the US is comparatively better than in Brazil. In Brazil, the potential income level is higher, with the abundance of skilled labor, and their minimum wage rate is increased to 1039 reais or 258 dollars. That is more effective in terms of the possible wage level parity.