Growth & Output
Purchasing power parity (PPP)
Purchasing power parity adjusts exchange-rate-converted figures for differences in local price levels, so a dollar of PPP-adjusted income buys a comparable basket of goods in every country. A haircut costing $5 in Vietnam and $30 in Switzerland means market exchange rates overstate the real gap in living standards between the two.
Why it matters
PPP-adjusted GDP is the fairer way to rank economies by living standards, not just currency-converted size.
Also known as: PPP, purchasing-power-adjusted