Let’s say Country A has 100 Money (nominal GDP) and Country B has 50 Money (nominal GDP). Rent in Country A is 50 Money and Rent in B is 10 Money. By PPP, Country B is way richer but that can’t be right surely?
If the (international) price of a barrel of oil is 30 Money then Country A can afford 3 barrels and have 10 Money left over but country B can only afford 1 barrel.
So isn’t Country A clearly the richer country?
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Nominal GDP is useful for an assessment of the productive output of a country relative to other countries.
PPP GDP adds another layer of estimates and attempts to normalize the income to purchasing power. This is somewhat less useful to compare BETWEEN countries but is a more useful tool to estimate the living standard to productive output WITHIN a country.
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