If the exchange rate from US dollars to Euros is $1= £0.92 which currency has more purchasing power?
In: Economics
Exchange rates alone generally don’t mean much. If a hamburger costs $1 in the United States but £5 in the UK, you could say that the dollar has more purchasing power than the pound even though the exchange rate from dollars to pounds suggests the pound is “stronger”.
But even that would depend on taking into account more factors to make sure you’re comparing apples to apples – it could easily be that beef is simply cheaper in the US because of extensive farm subsidies, for instance, so you’d need to compare many different products across many different types of expenses (energy, food, service, products, etc) to get a sense of which currency has a higher purchasing power in its respective home country.
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