India vs USA - Purchasing Power Parity #education #college #finance #abroad

Purchasing power parity (PPP) is an economic theory of exchange rate determination. It states that the price levels between two countries should be equal.

🔸For example, if the price of a Coca Cola in the US was 1$ and it was ₹50 in the India then the INR/USD exchange rate should be ₹50

i.e real value of 1$ = ₹50 according to the PPP theory.

- However, if you were then to look at the market exchange rate of the INR/USD pair, it is actually closer to 1$ = ₹80. The discrepancy occurs because the purchasing power of these currencies is different.

🔸As with any asset, there is the real value of a currency and the notional value, which financial markets trade at. The aim of the PPP measurement is to make comparisons between two currencies more valid, by adjusting for local purchasing power differences.

➡️PS: The point of this reel is just to introduce the concept of PPP and not to compare US education vs Indian education as each has its own pros and cons.

Source: Ig.com
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#college #education #abroad #salary #moneymanagement #personalfinance