Power purchasing parity Flashcards
1
Q
What is it?
A
It is used as an index to represent what the basket of goods is worth in each country
2
Q
What is the Big Mac index?
A
It represents how many Big Macs can be bought using the same amount of money but in different countries
3
Q
Why is it used?
A
It allows us to compare economic productivity and living standards in countries
This can be seen in Kenya where £2 in their own currency is enough money to live on but it is not for us.
This is because £2 is worth more money in their currency and so the basket of goods is worth more
