Economic Progress (Part II)

[KB]

No it doesnt.

that is GDP(current exchange rate)- which means all the goods and services produced in a country are added up and the monetary value is divided by the exchange rate prevailing. This measure depends on currency exchange rate.

GDP(PPP or purchasing power parity) means that instead of adding the value of the goods and services and then dividing the total by the exchange rate we assume as if the good or service were produced in the US. That is to say we get the goods and services produced in the country and multiply them by the rate at which the goods or services would sell in the US .

The GDP(PPP) measure is varies with lots of factors. If a certain good or service has great value in your country but not in the US, the measure will show you as a poor country.

If a bike sells at Rs. 1 lac and a car sells at Rs.1 million then the GDP of a country is the same whether it makes 1 car or 10 bikes. But if a car sells at $20,000 in the US and a bike sells at $1,500 then GDP could be Rs 0.9 million( if you make 10 bikes) and Rs 1.2 million if you make a car.

That is why i consider it ridiculous to measure economies on this measure.