Say you have two countries A and B. Suppose we have a situation where country A's currency can purchase much more in country B than the other way round. What causes this phenomenen?
Is it possible to have a situation with two equally well off countries, but where one country's currency can purchase more goods abroad?
Well in principle you could. Let's suppose there are two countries that do not trade a lot. Then even if their economic growth is relatively similar, we should not expect their exchange rate to be 1:1.
The exchange rate is a price, so if country A likes more the goods and services from country B than vice-versa, you should expect currency B to have a larger purchasing power than currency A.
However, The demand for goods from abroad is correlated with income, so if both countries have relatively similar economic growths, and they trade a lot with each other, the relative purchasing power of their currencies will tend to be similar.
