what GDP PPP means
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GDP = Gross Domestic Product – the total sum of all the assets in the entire state/country economy. A number that these days is about as subjective and fluid and arbitrary as attempting to count all the grains of sand in a square of desert during a tornado.
PPP = Payroll Protection Program. A large pile of money that was flooded into the US economy to keep people from socializing and spreading COVID at a time when it would be easy to lay off employees. The funds were distributed to businesses under the conditions that they had to keep their payroll whole, paying people to basically do nothing or paying them to remain part of the business.
GDP PPP is the “raw” Gross Domestic Product (GDP) adjusted for Purchasing Power Parity (PPP). GDP measures what an economy produces in terms of final goods and services. Since different economies have different price levels, the PPP adjustment is to try to adjust the GDP by what that amount would purchase according to a somewhat standard basket of good. This is done to give a comparable measure of a quality of life afforded by that GDP.
For ELI5 purposes, PPP (purchasing power parity) is a cost-of-living adjustment. Nominal (unadjusted) GDP looks at productivity or output as if that output was being *sold* globally, but it doesn’t describe how much that output can *buy* locally.
To calculate PPP adjustments, economists calculate the price of a “basket” of goods and services – thousands of them – in each country. Then, the nominal (unadjusted) GDP figures are divided by these cost ratios. Costlier countries will have less of a GDP advantage when adjusted for PPP. For example, Norway’s nominal GDP per person is roughly 30% higher than the US’s, but their basket of goods & services costs 28% more. As a result, their PPP-adjusted GDP per person is only 2% higher.
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