The utility of the passing time and measurement of the purchasing power of currencies in the flexible-exchange-rate system.
In economics, it is not the quantity that matters the most; it is the amount of utility. The purchasing power of a currency is not merely the volume of goods the money can obtain, but the amount of utility it can command. Primarily, money exchanges for some units of time spent laboring. As such, the ratio of the utility of time to the money wage should measure the purchasing power of the currency. This marginal utility of the time is the first derivative of the utility production function, derived from the compound interest equation, with respect to time. It follows that the purchasing power of the currency is dependent on both the rate of interest and the wage rate. This measure of purchasing power allows computation of a purchasing-power-parity exchange rate that truly reflects the fundamentals of the economy.