According to the purchasing power parity theory, exchange rates will eventually adjust such that they equalize the various

A) currencies' values in terms of goods and services.
B) inflation rates in the trading nations.
C) interest rates in the trading nations.
D) levels of supply and demand in the foreign exchange markets.

Purchasing Power Parity

A theory that compares different currencies through a "basket of goods" approach, aiming to evaluate the relative value of currencies.

Exchange Rates

The rate at which one currency can be exchanged for another currency, affecting international trade and economic transactions.

Inflation Rates

How quickly the broad price level of goods and services escalates, lessening consumer purchasing capability.