Th2.1: Purchasing Power Parities Flashcards
1
Q
Define Purchasing Power Parities
A
an exchange rate of one currency to another that compares the cost of living in different countries through comparing a typical basket of goods
2
Q
What do Purchasing Power Parities do?
A
provide an alternative to using exchange rates for comparisons of GDP
3
Q
How are these useful when comparing countries?
A
it takes into account the cost of living and so can compare living standards
4
Q
Why will the difference between the highest and lowest GDP’s be smaller when PPP’s are used?
A
poorer countries have a much lower cost of living than richer ones
5
Q
What is an example of this?
A
Bic Mac Index
