Is there a formula to calculate it.
2006-12-15 02:26:39 · 3 answers · asked by Gennosuke 1 in Social Science ➔ Economics
Suppose a Big Mc costs $3.75 in US and $2 in UK then purchasing power parity says 1 US$ is equivalent to $2/3.75UK$. Now convert the GDP of UK into US dollars at the published exchagne rate from Pound and DIVIDE that by the equivalent UK$ value got above and you will get PPP based GDP of UK. Mc Burger is assumed to be homogenous in UK and USA. If you want to be more puritanical you can choose a whole basket of goods and services that are similar in one country and USA and do the same method of calculation. For just knowing what it is even McBurger analogy is good enough and accurate enough.
Former consultant to Federal Reserve USA.
2006-12-15 03:17:31 · answer #1 · answered by Mathew C 5 · 1⤊ 0⤋
Matthew C. is alluding to the famous Big Mac index, published each year by The Economist (see the link below). Good stuff.
The World Development Report now calculates some PPP indices, I think, but the famous dataset is the Penn World Tables, which was the first big, systematic effort, and they have a detailed explanation of their measures in a paper published a while back. More recent versions of the dataset are available (that article, remains, however, their statement of methodology, I believe). If your university library and economics department have decent online resources, you should be able to access the latest Penn tables.
2006-12-17 06:39:02 · answer #2 · answered by Disembodied Heretic 2 · 0⤊ 0⤋
There is a website you can go to run by the CIA. Look up World Fact Book
www.odci.gov/cia/publications/factbook/index.html
That will give you all the info you need.
2006-12-15 02:29:23 · answer #3 · answered by Patrick B 3 · 1⤊ 0⤋