Purchasing power parity refers to:
A) Converting each country's GDP into U.S. dollars
B) Dividing each country's GDP by the size of its population
C) Adjusting GDP figures for the fact that prices are much lower in some countries than in others
D) Adjusting different GDP figures for inflation over time

Question

Quizplus · Accepted Answer

Purchasing power parity (PPP) is the economic theory that compares different countries' currencies through a "basket of goods" approach. It estimates the amount of adjustment needed on the exchange rate between countries so that goods and services are of equal value. This adjustment is necessary to account for differences in prices between countries, which can skew the real value of GDP figures.

Purchasing Power Parity Refers To