and why is it important when compairing two countries’ Gross Domestic Product?
In: 1
It’s a numeric factor that has the purpose of accounting for different costs of living in different countries. I.e. what $1000 can buy in the USA, and what it can buy in Nigeria, Indonesia, Brazil, Australia, etc are all different.
So a certain selection of common purchases is made and the price of that is determined across the different countries, which is used to determine Purchasing Power Parity. Then when GDP is listed according to PPP, it is an actual fair comparison since it factors what can be bought with the money. (The actual values then have to be listed according to a selected country’s currency, so usually that same country’s PPP factor is used for listing the values in documents etc.)
Latest Answers