<p>Nominal GDP is often more quoted in media and in politics than the GDP in PPP, but that doesn't make it be less important. In fact, as stated by <em>1muflon1</em> on the comments, economists typically like to measure differences between comparable things, so when comparing GDPs there are usual corrections done on purchasing power parity, as well as inflation. </p>

<p>The PPP indicator has been present in literature for a long time, <a href="https://www.worldbank.org/en/programs/icp/brief/chronological-table" rel="nofollow noreferrer">mentioned in the early 1500's, and translated to modern terms since 1918</a>. It's regularly calculated by international bodies (such as the UN under it's International Comparison Programme). </p>

<p>The GDP PPP is also regularly used in real life by institutions such as the OECD, IMF and World Bank to make recommendations on economic policy, and by traders to better assess when stocks and currencies might be under- or over-valued. <a href="https://www.investopedia.com/updates/purchasing-power-parity-ppp/" rel="nofollow noreferrer">This article on investopedia</a> provides a concise overview.</p>

CC BY-SA 4.0
2020-01-30T23:13:32.413Z
2020-01-30T23:13:32.413Z
JoaoBotelho
<p>GDP is not just mere money.   GDP is the monetary value of all finished goods and services made within a country during a specific period.   </p>

<p>The importance of GDP comes from its analytical and comparative value:</p>

<pre><code>-It tells us an enormous amount about how a nation is doing.

-GDP growth rate measures how fast the economy is growing.

-Real GDP per capita describes the standard of living of a country.

-The  debt to GDP ratio describes whether a country produces enough each year 
 to pay off its national debt.

-Economists can use GDP to determine whether an economy is growing or 
 experiencing a recession.

-Investors can use GDP to make investments decisions
</code></pre>

<p>Where as Purchasing power parity (PPP) is a popular metric used by macroeconomic analysts that compares economic productivity and standards of living between countries.</p>

<p>Some countries adjust their gross domestic product (GDP) figures to reflect PPP</p>

<p>It is used to for:
  Developing reasonably accurate economic statistics to compare the market 
  conditions of different countries.</p>

<p>To provide insights on the potential overvaluation or undervaluation of a 
  nation’s currency.</p>

CC BY-SA 4.0
2020-03-02T10:39:05.100Z
Okay, but if a loaf of bread in Country A is worth \$1 and in Country B it's worth \$0.10, and so on for all other goods and services, what good is it to say that B's GDP is 10% of A's?
Criticize SE actions means ban
CC BY-SA 4.0
2020-01-30T18:46:31.277Z
2020-01-30T18:46:31.277Z
Mike J
<p>A unit of money in Country X may buy far more goods in Country Y than in the former. But Country X prides in calling itself a larger economy and a more prosperous entity.
As money is just a social construct created as a substitute to represent the value of goods and thus is useless by itself : How can mere money, such as GDP be given more importance and atfention than its PPP counterpart ?</p>

CC BY-SA 4.0
2020-01-27T10:57:10.757Z
This is not really question for economists. In economics and economic research we always correct for PPP and also inflation and other factors. I don’t know of any serious economist who would just compare nominal GDPs in international comparison. We always adjust GDP for PPP and inflation etc when appropriate... if your question is why some politicians or non-economists journalist or public compare nominal GDPs instead of real PPP corrected GDPs in their posts or speech that’s question for political scientists or sociologists or anthropologists not for economists.
1muflon1
CC BY-SA 4.0
2020-06-30T13:10:41.950Z
I’m voting to close this question as off-topic because as pointed out in comments, economists do try to take PPP into account when necessary.
Giskard
<gdp>
Why isn't PPP given due importance?
Nik Hil
# Why isn't PPP given due importance?

(Asked by: username_0 on 2020-01-27)

A unit of money in Country X may buy far more goods in Country Y than in the former. But Country X prides in calling itself a larger economy and a more prosperous entity.
As money is just a social construct created as a substitute to represent the value of goods and thus is useless by itself : How can mere money, such as GDP be given more importance and atfention than its PPP counterpart ?

**Tags:** gdp

> **Comments:**
> **username_1**: This is not really question for economists. In economics and economic research we always correct for PPP and also inflation and other factors. I don’t know of any serious economist who would just compare nominal GDPs in international comparison. We always adjust GDP for PPP and inflation etc when appropriate... if your question is why some politicians or non-economists journalist or public compare nominal GDPs instead of real PPP corrected GDPs in their posts or speech that’s question for political scientists or sociologists or anthropologists not for economists.  
> **username_2**: I’m voting to close this question as off-topic because as pointed out in comments, economists do try to take PPP into account when necessary.  

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## 2 answers

### Answer by username_3 on 2020-01-30. Score: 3

Nominal GDP is often more quoted in media and in politics than the GDP in PPP, but that doesn't make it be less important. In fact, as stated by *username_1* on the comments, economists typically like to measure differences between comparable things, so when comparing GDPs there are usual corrections done on purchasing power parity, as well as inflation.

The PPP indicator has been present in literature for a long time, [mentioned in the early 1500's, and translated to modern terms since 1918](https://www.worldbank.org/en/programs/icp/brief/chronological-table). It's regularly calculated by international bodies (such as the UN under it's International Comparison Programme).

The GDP PPP is also regularly used in real life by institutions such as the OECD, IMF and World Bank to make recommendations on economic policy, and by traders to better assess when stocks and currencies might be under- or over-valued. [This article on investopedia](https://www.investopedia.com/updates/purchasing-power-parity-ppp/) provides a concise overview.


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### Answer by username_4 on 2020-01-30. Score: 2

GDP is not just mere money. GDP is the monetary value of all finished goods and services made within a country during a specific period.

The importance of GDP comes from its analytical and comparative value:

```
-It tells us an enormous amount about how a nation is doing.

-GDP growth rate measures how fast the economy is growing.

-Real GDP per capita describes the standard of living of a country.

-The  debt to GDP ratio describes whether a country produces enough each year 
 to pay off its national debt.

-Economists can use GDP to determine whether an economy is growing or 
 experiencing a recession.

-Investors can use GDP to make investments decisions

```

Where as Purchasing power parity (PPP) is a popular metric used by macroeconomic analysts that compares economic productivity and standards of living between countries.

Some countries adjust their gross domestic product (GDP) figures to reflect PPP

It is used to for:
Developing reasonably accurate economic statistics to compare the market
conditions of different countries.

To provide insights on the potential overvaluation or undervaluation of a
nation’s currency.

> **Comments:**
> **username_5**: Okay, but if a loaf of bread in Country A is worth \$1 and in Country B it's worth \$0.10, and so on for all other goods and services, what good is it to say that B's GDP is 10% of A's?  

---

