The direct functional relation between exchange rate and purchasing power is unrealistic.
There is a problem in construction of price index numbers.
It neglects capital account.
The theory assumes that there are no structural changes.
According to this theory there is no change in barter trade terms.
It neglects demand and supply forces.
It neglects aggregate income and expenditure.
It doesn’t take into considerations change in international economic relations.
Judiesiz answered the question on August 7, 2018 at 13:50
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