Purchasing Power Parity

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Purchasing Power Parity (PPP) is a comparison used to judge how much of a country's currency is necessary to buy the same goods and services in two different countries. PPP is based on the Geary-Khamis international dollar, which is equivalent to the US dollar. A popular example of PPP is the "Big Mac Index" or the comparison of prices of a McDonalds Big Mac in different countries. The concept is based on the Law of One Price, which states that without trade barriers and transaction costs, the same goods would have the same price everywhere.

Worldwide PPP compared to the US$

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