The measurement of prices in several nations known as purchasing power parity (PPP)[1] compares the absolute purchasing power of the national currencies by looking at the costs of particular items.
The price of a basket of products at one location divided by the price of the same basket of goods at a different location is effectively what makes up the PPP ratio. Because of tariffs and other transaction costs, the PPP inflation and exchange rate may be different from the market exchange rate. The Purchasing Power Parity indicator can be used to compare economies in terms of their Gross Domestic Product, labor productivity, and actual individual consumption. In some situations, it can also be used to analyze price convergence and compare how much it costs to live in various locations.
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