What is GDP per capita in PPS?
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There’s LOTS of variables when you are comparing one country to another. There’s the value of their currency, but even when you take that into account it’s often not the same.
GEP per capita in PPS means Goes Domestic Product, per capita, in Purchasing Power Standards. So, first of all GDP is the total value of all the goods and services that a country produces. It’s a really complicated calculation but it’s basically just the value of everything a country makes.
But that’s not super useful when comparing countries. Take China and Canada (for example). Canada has around 40 million people, and china has 1,400 million people. So if you are trying to compare the 2 countries you really need to calculate GDP on a per person basis, that’s what the “per capita” part of the question means.
The final comparison has to do with both currency and purchasing power. Canada uses Canadian Dollars to calculate it’s GDP. China uses Renminbi. We can use the current conversion rate to convert the currencies but there’s actually a lot more than that.
Just doing currency conversion includes a lot of volatility because of the supply and demand for the 2 currencies changes every day. So instead what we do is we try to calculate how much it would cost to buy the same items in both countries, and use that as a way of converting the values to a common currency.
The funest, and perhaps most interesting example of this is known as the “big mac index”. This looks at the cost to purchase a big mac (from McDonalds) in many countries around the world. Then it uses the current currency conversion rates to change it all into US dollars. What you find is that some countries have more expensive big macs (for lots of reasons, like taxes or changes in minimum wage, ect).
Here’s a link https://www.economist.com/big-mac-index
> A Big Mac costs 2% more in Canada (US$5.25) than in the United States (US$5.15) at market exchange rates.
If you click the GDP adjusted button it’ll also say:
> Based on differences in GDP per person, a Big Mac should cost 7.5% less.
This is why they use PPS instead of simply adjusting using currency rates.
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