Whether a currency is above or below purchasing power parity

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Reference no: EM131305184

According to an article in the New York Times published in mid-2010, "The euro, which was trading around $1.25 on Friday, is still above ‘purchasing power parity.'"

a. What does it mean to say that a currency is above purchasing power parity?

b. How is it possible to tell whether a currency is above or below purchasing power parity?

Reference no: EM131305184

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