Purchasing Power Parity, usually abbreviated to PPP, is a method of standardising economic statistics, especially GDP numbers. PPP involves comparing the purchasing power of different currencies in different periods or nations to find an approximate convertible value. This is useful for comparing average wealth across countries where the cost of basic goods and services may differ widely. PPP can also be used by traders to make informed decisions when participating in the financial markets.
A common economic metric used to compare the wealth of different economies is GDP at PPP. This takes the gross domestic product of a region or country and converts it according to the purchasing power of one dollar in that economy. GDP at purchasing power parity provides a more realistic measure of personal wealth and value generated per individual when compared to raw GDP numbers.
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