Wednesday, January 18, 2012
Is Real GDP the same as PPP?
You are correct in saying that real GDP is nominal GDP restated after considering inflation (that way we see true growth in output vs. distortions brought about by changes in market value of outputs produced). However, it might be controversial to ume that PPP (purchasing power parity) is the same thing, since it concentrates on how exchange rates can distort the value or price of items between countries. Using PPP the U.S. and China look "close", but nominal GDP would tell a much different story. I'm sure there are a whole group of economists who would debate this.
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