Is Real GDP the same as PPP?

Question

Real GDP growth on an annual basis is the nominal GDP growth rate adjusted for inflation and expressed as a percentage. PPP is the method of using the long-run equilibrium exchange rate of two currencies to equalize the currencies' purchasing power.

I'm not sure if these are the same thing. Can someone with some econ. experience help me?

Thanks, it is different, but someone please explain what exactly PPP is? And how exactly do you get rid of calculating inflation?
Also why is the CIA factbook thing bogus?

Answer 1

There's no debate about it -- real GDP is not at all PPP. They are completely unrelated concepts.

A lot of people misuse the PPP concept. The CIA badly misuses it in its world fact book. It ranks countries by GDP (purchasing power parity) -- which is a meaningless concept yielding bogus information. I'm not sure what their problem is, but then it always grossly exaggerated the Soviet economy too.

Answer 2

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 assume 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.