The idea that floating exchange rates will equate the buying power of national currencies is called

A) the equation of exchange.
B) the balance of payments.
C) Say's Law.
D) purchasing power parity theory.

Purchasing Power Parity Theory

An economic theory that suggests that in the long term, exchange rates should adjust to equalize the price of identical goods and services in different countries.

Floating Exchange Rates

A system where the value of a currency is allowed to fluctuate according to the foreign exchange market without direct government control.

National Currencies

The official money used in different countries, which serves as a medium of exchange within each nation and can have different forms such as notes and coins.