Purchasing Power Parity (PPP) theory states that none of the options the exchange rate between currencies of two countries should be equal to the ratio of the countries' general price levels. the prices of standard commodity baskets in two countries are not related as the purchasing power of a currency sharply declines that currency will appreciate against stable currencies. Purchasing Power Parity (PPP) theory states that none of the options the exchange rate between currencies of two countries should be equal to the ratio of the countries' general price levels. the prices of standard commodity baskets in two countries are not related as the purchasing power of a currency sharply declines that currency will appreciate against stable currencies