Tag Archive: purchasing power parity

  1. Last Week In Switzerland, A Big Mac Cost $7.54

    Comments Off on Last Week In Switzerland, A Big Mac Cost $7.54

    The Economist invented the Big Mac Index in 1986 as an entertaining way to assess whether currencies were at the “correct” levels. The index uses purchasing power parity (PPP) to measure one currency against another. PPP is the idea that exchange rates should adjust so the same product (in this case, a hamburger) has the same price in two different countries when the price is denominated in the same currency. After updating the Index on January 22, 2015, The Economist reported: (more…)

  2. China And The USA – Does Size Matter?

    Comments Off on China And The USA – Does Size Matter?

    The World Bank recently stated that the US economy will soon be surpassed by the Chinese however, such measures are quite illusory. They work on the basis of ‘purchasing power parity’ which is not a wildly efficient measure. However strongly China’s GDP is growing and even if it does surpass that of the US, the two economies are very different in structure and economic sophistication. For example, China’s per capita income, which is a much more accurate measure of economic development, comes out as only 20% of America’s and probably only slightly ahead of that of, say, Jamaica. That is a huge difference and it will take many decades to close that chasm. (more…)