<p>Well in principle you could. Let's suppose there are two countries that do not trade a lot. Then even if their economic growth is relatively similar, we should not expect their exchange rate to be 1:1. </p>

<p>The exchange rate is a price, so if country A likes more the goods and services from country B than vice-versa, you should expect currency B to have a larger purchasing power than currency A. </p>

<p>However, The demand for goods from abroad is correlated with income, so if both countries have relatively similar economic growths, and they trade a lot with each other, the relative purchasing power of their currencies will tend to be similar. </p>

CC BY-SA 4.0
2019-06-16T17:01:44.593Z
2019-06-16T17:01:44.593Z
Regio
<p>Say you have two countries A and B. Suppose we have a situation where country A's currency can purchase much more in country B than the other way round. What causes this phenomenen? </p>

<p>Is it possible to have a situation with two equally well off countries, but where one country's currency can purchase more goods abroad? </p>

CC BY-SA 4.0
2019-06-16T12:49:34.787Z
I think you need to change the wording of this question, since it appears obviously impossible. For simplicity, assume the exchange rate is 1:1. If you have 100 units of currency “A”, that is equivalent to 100 units of “B.” A person from A spending 100 “A” will get exactly the same purchasing power as someone from B who exchanged for 100 units; and the exact same is true if we flip to looking at purchases in country B.
Brian Romanchuk
<macroeconomics><gdp><currency><currency-exchange>
Purchasing power of currency abroad
Trajan
# Purchasing power of currency abroad

(Asked by: username_0 on 2019-06-16)

Say you have two countries A and B. Suppose we have a situation where country A's currency can purchase much more in country B than the other way round. What causes this phenomenen?

Is it possible to have a situation with two equally well off countries, but where one country's currency can purchase more goods abroad?

**Tags:** macroeconomics, gdp, currency, currency-exchange

> **Comments:**
> **username_1**: I think you need to change the wording of this question, since it appears obviously impossible. For simplicity, assume the exchange rate is 1:1. If you have 100 units of currency “A”, that is equivalent to 100 units of “B.” A person from A spending 100 “A” will get exactly the same purchasing power as someone from B who exchanged for 100 units; and the exact same is true if we flip to looking at purchases in country B.  

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## 1 answers

### Answer by username_2 on 2019-06-16. Score: 1

Well in principle you could. Let's suppose there are two countries that do not trade a lot. Then even if their economic growth is relatively similar, we should not expect their exchange rate to be 1:1.

The exchange rate is a price, so if country A likes more the goods and services from country B than vice-versa, you should expect currency B to have a larger purchasing power than currency A.

However, The demand for goods from abroad is correlated with income, so if both countries have relatively similar economic growths, and they trade a lot with each other, the relative purchasing power of their currencies will tend to be similar.


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