Explain Purchasing Power Parity

What will be an ideal response?

PPP states that the exchange rate between two countries' currencies equals the ratio of the countries' price levels.
A fall in a currency's domestic purchasing power (i.e. an increase in the domestic price level) will be associated with a proportional currency depreciation in the foreign exchange market and vice versa.
= PUS/PE where P is the price of a reference commodity basket.
Rearrange: PUS = × (PE)
Thus, PPP asserts that all countries' price levels are equal when measured in terms of the same currency.