Just30:
Read what PPP is
We economist use PPP for so many things

These are a few learn

Purchasing power parity (PPP) is an economic theory that allows the comparison of the purchasing power of various world currencies to one another. It is a theoretical exchange rate that allows you to buy the same amount of goods and services in every country.

Government agencies use PPP to compare the output of countries that use different exchange rates.1

 You could use it to find out where to get the cheapest hamburger in the world.

PPP Calculation
The purchasing power parity calculation tells you how much things would cost if all countries used the U.S. dollar. In other words, it describes what anything bought throughout the world would cost if it were sold in the United States. The total of all those goods and services equals the country's economic output. Add the number produced in a year and you get the country's gross domestic product (GDP) as measured by PPP.

Parity is tedious to compute. A U.S. dollar value must be assigned to everything. That includes items not widely available in America. For example, there aren't too many ox carts in the United States. Also, it is doubtful that the cart's U.S. price would accurately describe its value in rural Vietnam, where it's needed to grow rice.

The World Bank computes PPP for each country in the world.2 It provides a map that shows the PPP ratio compared to the United States.3

For many developing countries, the PPP is estimated using a multiple of the official exchange rate (OER) measure. For developed countries, the OER and PPP measures are more similar. These two values are similar because the standards of living in developed countries are closer to those of the United States.1

How to Use PPP
An economist will use the PPP to compare the economic output of different nations against one another. It might be bused to determine which country has the world's largest economy. The theoretical value is also helpful to traders in foreign currency and investors holding foreign stocks or bonds as it helps to predict fluctuations in international currency and indicate weakness.2

Although it doesn't happen often, PPP is also used to set the exchange rate for new countries. It is also used to forecast future real exchange rates.

Purchasing power parity finds its greatest use in macroeconomic studies as you compare GDP. Because all countries don't use the U.S. dollar, values can be skewed.

For example, China produced 94.8 trillion yuan's worth of goods and services in 2018. Using an exchange rate of 6.97 yuan per dollar, that's $13.61 trillion U.S. dollars. The United States produced $20.54 trillion.4 However, most of the difference between the two is because the cost of living in China is much lower than it is in the United States. Since this method depends on exchange rates, China's GDP will change when its exchange rate changes.

Comparing a Country's Output
PPP recalculates a country's GDP as if it were being priced in the United States. The CIA World Factbook calculates PPP to compare output among countries.5 It estimated that China's 2017 GDP was $23.1 trillion. It's much more than the U.S. GDP of $19.4 trillion. According to PPP, China has the world's largest economy.1

You could also use PPP to find out where you could get a McDonald's Big Mac for less. In June 2019, the U.S. Big Mac cost $5.74. In China, you can get the same thing for only $3.05. The Economist's Big Mac Index reveals what a Big Mac costs in 55 countries.6

The Big Mac Index is published each year by The Economist and was created in 1986.

The Big Mac Index
Burgernomics—the study of the Big Mac index—can give an informal measure of the PPP. Like most other sandwiches, the Big Mac doesn't travel well in its final form so it's not exported. Most of its price depends on local labor and restaurant rental costs. Since labor in China is less expensive, the Big Mac costs less to produce one unit than it does in the United States. The Big Mac Index will tell you a lot about a country's cost of living. If you want to live cheap, and you can move to any country in the world, use the Big Mac Index.

Thanks to McDonald's standards, a Big Mac is basically the same sandwich anywhere in the world. You aren't getting a smaller sandwich in China because it's almost $2 cheaper. Purchasing power parity solves this problem. It recalculates the value of a country's goods and services as if they were being sold at U.S. prices.

History
PPP was created after World War I. Before then, most countries relied on the gold standard. A country's exchange rate told you how much gold the currency was worth. Most countries abandoned the gold standard to pay for the war. They printed all the money they needed, creating inflation.

After the war, the Swedish economist Gustav Cassel suggested multiplying each currency's pre-war value by its inflation rate to get the new parity. That formed the basis for today's PPP.7

PPP Theory
Purchasing power parity is based on an economic theory that states the prices of goods and services should equalize among countries over time.8 International trade allows people to shop around for the best price. Given enough time, this comparison shopping allows everyone's purchasing power to reach parity or equalization.

Why We Don't Live in a PPP World
PPP depends on the law of one price. That states that once the difference in exchange rates is accounted for, then everything would cost the same.

That's not true in the real world for four reasons. First, there are differences in transportation costs, taxes, and tariffs. These costs will raise prices in a country. Countries with many trade agreements will have lower prices because they have fewer tariffs. Socialist countries will have higher costs because they have more taxes.

A second reason is that some things, like real estate and haircuts, can't be shipped. Only ultra-wealthy global travelers can compare the prices of homes in New York to those in London.

A third reason is that not everyone has the same access to international trade. For example, someone in rural China can't compare the prices of oxen sold throughout the world. But Amazon and other online retailers are providing more real purchasing power parity to even rural dwellers.

A fourth reason is that import costs are subject to exchange rate fluctuations. For example, when the U.S. dollar weakens, then Americans pay more for imports. The most significant driver of changing exchange rate values is the foreign exchange market. It creates wide swings in exchange rate values.9 For example, in 2014, many traders shorted the euro. The European Union's currency dropped. As a result, costs throughout the EU also fell. When traders began shorting the U.S. dollar in 2017, the dollar weakened.

The Bottom Line
The best way to understand PPP is to study the Big Mac Index. This index was created as a humorous attempt to illustrate how the PPP worked by comparing the prices of a globally sold product, the McDonald’s Big Mac burger. The Big Mac Index has been published in The Economist since 1986.

Calculating for purchasing power parity allows economists to determine the cost of living in other countries compared to the United States. PPP is a good tool for comparing GDP outputs among nations. It is also used to determine which have large or small economies. But since it involves many factors such as differences in taxes, tariffs, transportations costs, import costs, and the like, the PPP calculation is highly complex. This is best done by experts.

you donkey i told you not to copy an paste..just explain

anyway, i didn't read much from your post..stoped where you said WE ECONOMISTS

mtisTheQubit:

ths Ghanaians are depressing sometimes..their arguments never ends even if they face defeat...

the boy is here from morning to evening just to spew nonsense . He can even start a debate that Ghana is bigger than Kenya in land mass and for sure he will win

Shma:
the boy is here from morning to evening just to spew nonsense . He can even start a debate that Ghana is bigger than Kenya in land mass and for sure he will win

Truth be told, have realized west Africans in general admire eat africa...they throw stuff just to feel relevant

Shma:
GDP ppp won't tell you anything, it's basically a facade not going into the root difference,. If your dysfunctional brain is deceiving you about the basics economics you need to upgrade it. For instance China having bigger ppp than USA doesn't means China is enjoying life than USA. The quality of consumption really matters. Your productivity will be meaningless if you travel to other countries, your low quality services which will favour the natives will not apply to advance nations with high nominal GDP, it is biased towards a bigger ppp compared to nominal GDP and that should tell a lot about the cases in in Africa (Nigeria vs south Africa) Europe(Israel vs Iran) and maybe China vs USA. The bottom line is that you are nothing when you go to other nations. Your products and services will be useless when converted to foreign currency. You will not enjoy the confined cheap life you used to enjoy at your country and that's why GDP nominal is always superior to your so called PPP

this is the most useless economics interpretation i've ever seen in my life, jeez.

And stevoh is applauding this Bunch of olodos.

@just30

where are you
anyway talking of currency (rem ppp) whats happening with cedi

The cedi is down 13% so far in 2019, according to data compiled by Bloomberg, poised for the worst decline since 2015, when it slumped 18%. It has declined every year since Bloomberg started keeping records in 1994.

@theenchante

Bro define PPP. from your own words

Shma:
I just told you to go upgrade your head, you don't know anything to do with economics. Where in my sentiments did you see tiny Ghana being mentioned? I was only trying to give out examples with big nations like China and USA and I said Chinese can not enjoy life in USA putting in mind their huge ppp dominance over USA.

now you sound funny
Chinese are the ones enjoying life in the US

PPP, nominal GDP per capita has nothing to do with disposable income
LEARN from the mouth of wisdom.



most of USA tourist comes from China.
it all has to do with cost of living

the cost of living in China is low hence, people turn to have more disposable income

A doctor in the US earns more than his Chinese counterpart, whiles the American doctor who earns above 85K is paying 24% as tax, the Chinese is paying 6% or so.
The Chinese doctor gets health care as a part of his tax and the American does not.
Cost of living in the US is very high compared to China.

At the end of the month, the chinese doctor ends up with more money in hand than the American doctor.

Learn about inequality and you will understand.

Stevoh18:



Can u substaiate/ provide more details

ive done it above

mtisTheQubit:

ths Ghanaians are depressing sometimes..their arguments never ends even if they face defeat...

I know
it hurts

JUST WORK HARD and your country may one day catch up with Ghana.
I can see, you so badly want to.

dont feel depressed
we dont want any suicide this year

mtisTheQubit:


you donkey i told you not to copy an paste..just explain

anyway, i didn't read much from your post..stoped where you said WE ECONOMISTS

reason why you lack understanding of the terms PPP and Nominal GDP

theenchanter:
this is the most useless economics interpretation i've ever seen in my life, jeez.

And stevoh is applauding this Bunch of olodos.

when you see it, just laugh

They are dumb dumbs

mtisTheQubit:
@just30

where are you
anyway talking of currency (rem ppp) whats happening with cedi

The cedi is down 13% so far in 2019, according to data compiled by Bloomberg, poised for the worst decline since 2015, when it slumped 18%. It has declined every year since Bloomberg started keeping records in 1994.

we are in 2020
the cedi is okay.

Just30:


now you sound funny
Chinese are the ones enjoying life in the US

PPP, nominal GDP per capita has nothing to do with disposable income
LEARN from the mouth of wisdom.



most of USA tourist comes from China.
it all has to do with cost of living

the cost of living in China is low hence, people turn to have more disposable income

A doctor in the US earns more than his Chinese counterpart, whiles the American doctor who earns above 85K is paying 24% as tax, the Chinese is paying 6% or so.
The Chinese doctor gets health care as a part of his tax and the American does not.
Cost of living in the US is very high compared to China.

At the end of the month, the chinese doctor ends up with more money in hand than the American doctor.

Learn about inequality and you will understand.

An thats why i dont take you seriously man..where did you get the 6% .The Individual Income Tax in China (commonly abbreviated IIT) is administered on a progressive tax system with tax rates ranging from 3 to 45 percent. A doctor is not on lower scale dude..just stop with the lies man

Just30:
we are in 2020
the cedi is okay.

still dropping.... anyway just30 your country needs to diversify asap...ths idea of oil an gold doesn't help much...the prices are usually controlled by outsiders..

Just30:


reason why you lack understanding of the terms PPP and Nominal GDP

am allergic to bull stuff

theenchanter:
this is the most useless economics interpretation i've ever seen in my life, jeez.

And stevoh is applauding this Bunch of olodos.

You First need to understand the meaning of GDP ppp. Before popping your nose to issue you don't understand. At this point I will have to give you an overview of it ,Purchasing power parity (PPP) is measured by finding the values (in USD) of a basket of consumer goods that are present in each country. It's so difficult to measure or rather compare two countries economy using ppp and therefore it only involves economy within the country, that's why you will find China having cheap life as compared to USA but when quality is factored in China will not have a say.

mtisTheQubit:


An thats why i dont take you seriously man..where did you get the 6% .The Individual Income Tax in China (commonly abbreviated IIT) is administered on a progressive tax system with tax rates ranging from 3 to 45 percent. A doctor is not on lower scale dude..just stop with the lies man

im telling you what it is and you are still making noise

There are particular reason why doctors in China receive those tax rates
They are not the highest-paid employees in China

mtisTheQubit:

am allergic to bull stuff

thats funny

mtisTheQubit:

Truth be told, have realized west Africans in general admire eat africa...they throw stuff just to feel relevant

just realised Ghanaians have problems

mtisTheQubit:

still dropping.... anyway just30 your country needs to diversify asap...ths idea of oil an gold doesn't help much...the prices are usually controlled by outsiders..

my country is more diversified

with multiple earning sources

Danielnino00:


Every hour isn't rush hour ,you slowpoke...

The monkey who has allowed envy to cloud his mind wouldn't know that...

Austine1213:


SA has biggest formal retail sector, but nigeria has bigger ppp

He said retail market he didn't ask you for specification..

Just30:
my country is more diversified

with multiple earning sources

ok remove oil, gold an cocoa beans..list the others

Shma:
it's true dude, stop crying

What is true shma..

@Kazi please i can see you crawling down three..please no Kilimanjaro photos..we are debating on development stuff today..

Shma:
just realised Ghanaians have problems

I think Ghanaians are the problem..

Shma:
I pass there on a daily basis and I usually notice any slight activity on the sight.
https://www.youtube.com/watch?v=uCU1K-PE-Nc that is the new design that is to be constructed.

Shma there is nothing you g on there...it is a bad thing to decieve one self all in the name on fake comfort....


Lol I can't stop laughing at how you said..."after little delay pinnacle is back"..

Hahahaha my rib.....

Shma:
You are just sounding like your brother justo30 am now beginning to think that you are actually a Ghanaian. The Nigerians in this forum are not like you. You can even notice that. No Nigerian apart from you and your country man justo30 who are singing Tanzania and Ethiopia rubbish all through. I was even waiting for this sarcastic Nigeria doomed guy to support it but I never saw . So lemme tell you Ghanaian, your game will not work bro

There is nothing that I am.trying to work out here , neither am I playing any game...IAM just telling you the truth you don't want to hear... Ethiopia and TZ is ahead of you and this is not the first time I am saying this.

Just30:
when you see it, just laugh

They are dumb dumbs

like seriously....

Instead of spending more time in class, niggars are spewing jargons, but thats not a problem, anybody can be dumb on some subjects.... d real problem is those applauding nonsense.

Lemme laugh a bit.

Shma:
truly this Ghanaian got a problem

Lol you really think me Be ghanian...lo this thread has messed your paranoid ass up..

wonders shall never end

since i joined this platform, the most informed discussion ive had with anyone on economics has been with THECHANTER

Shma:
You First need to understand the meaning of GDP ppp. Before popping your nose to issue you don't understand. At this point I will have to give you an overview of it ,Purchasing power parity (PPP) is measured by finding the values (in USD) of a basket of consumer goods that are present in each country. It's so difficult to measure or rather compare two countries economy using ppp and therefore it only involves economy within the country, that's why you will find China having cheap life as compared to USA but when quality is factored in China will not have a say.

Just30:
we knoe Ghana is a small economy especially when all of Africa's economy combine does not make up to 5% of the global ecconomy.

But Ghana economy will forever remain larger than your countries economy.

Facts