parity

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parity

In economics, equality in price, rate of exchange, purchasing power, or wages. In international exchange, parity exists when the exchange rate between two currencies makes the purchasing power of both currencies equal. Adjustments to maintain parity can occur in the marketplace as prices change in response to supply and demand, or through the intervention of national governments or international agencies such as the International Monetary Fund. In U.S. agricultural economics, the term parity is used for a system of regulating the prices of farm commodities, usually by government price supports and production quotas, to guarantee farmers the purchasing power they had in a past base period. Parity is also used in personnel administration to establish equitable wage rates for various classes of employees.

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