Parity is a word borrowed from the Latin language, which is written as "paritas" and means equality. In Russian, the meaning of the word "parity" implies the equality of the parties (two or more) in certain aspects. In order to understand the correct use of the word, it is necessary to delve deeper into its interpretation.
What is parity and how to apply it in everyday life? It can have several interpretations, such as: equality of parties, goals, responsibilities and other factors. At the same time, parity refers to the ratio between the currency units of different countries, which can be established in relation to another currency, gold, and even to a commodity, which will be defined as purchasing power parity. Separately, there are legal parity, which is actively used in judicial practice, and military parity or equality in the strength of strategic weapons.
The word "parity" is used in almost all spheres of human life, but some of its types are actively used for global interaction by countries.
Situations where currency parity is used
Everyone has come across the concept of "currency parity" at least once in their life, even if they have not used this expression.
Currency parity is a well-established expression, which means the ratio of the exchange rates of two or more countries, which ensures equilibrium in supply and demand in each individual case. It is established officially by each state, based on the provision of the country's gold reserves or purchasing power.
The currency parity may mean narrower concepts, depending on how the monetary units of the countries are provided and supported:
- Gold parity - the ratio of the monetary units of countries is provided by gold.
- Coin parity - determined by the silver or gold backing of the currency.
- Nominal parity - applicable when another currency or metal is adopted as the standard in countries.
- Price parity - equilibrium is achieved based on the price of different goods.
The concept of disparity is distinguished separately, that is, price imbalances, when a change in one area does not correspond and does not balance changes in another industry. This phenomenon is most often observed in countries during the reformation.
Purchasing parity and its features
Purchasing power parity is easiest to interpret based on world market examples. Equilibrium should be achieved by maintaining a single price for the same product or product for differentcountries, taking into account the established exchange rate. The amounts spent on the same product for different countries should be equal, taking into account the conversion of one currency into another.
Pure buyer parity is rare. The amount that countries spend on the same product can be subject to change under the influence of duties, fines, related costs.
Use of parity in jurisprudence
Legal parity is a common term used to define equality in the representation of two or more parties in jurisprudence.
Used when considering cases in arbitration courts, in particular when considering labor disputes.
The importance of military parity in world practice
Military, military-strategic, nuclear parity is the equality of world powers or their groups, which is determined by the level of weapons, including the volume of nuclear weapons.
One of the most important indicators in the field of the armed forces.
