GDP represents all goods — in terms of market value — produced by a nation; PPP is an economic theory on exchange rates between companies. A relationship exists between GDP and PPP because nations desire information on the price of a single item in each nation’s currency.
What is the formula for calculating GDP PPP?
GDP PPP refers to the GDP converted to US dollars using purchasing power parity rates and divided by total population. Purchasing power parity (PPP) is used to adjust the exchange rate differences among countries.
How do economists use PPP?
Purchasing power parity (PPP) is a popular metric used by macroeconomic analysts that compares different countries' currencies through a "basket of goods" approach. Purchasing power parity (PPP) allows for economists to compare economic productivity and standards of living between countries.
