GDP ranking, PPP based (World Bank issued global rating for 2012)

World Bank ^

[cunning_fish]

Gross domestic product 2012, PPP (millions of Ranking Economy international dollars)

1 United States 15,684,800

2 China 12,470,982

3 India 4,793,414

4 Japan 4,490,681

5 Russian Federation 3,380,071

6 Germany 3,307,873

7 Brazil 2,365,779

8 France 2,354,874

9 United Kingdom 2,264,751

10 Mexico 2,015,281

[exDemMom]

What is “PPP based”?

[cunning_fish]

>>>What is “PPP based”?<<<

aka “Big Mac Index”

The Big Mac PPP exchange rate between two countries is obtained by dividing the price of a Big Mac in one country (in its currency) by the price of a Big Mac in another country (in its currency). This value is then compared with the actual exchange rate; if it is lower, then the first currency is under-valued (according to PPP theory) compared with the second, and conversely, if it is higher, then the first currency is over-valued.

For example, using figures in July 2008:[3]
1.the price of a Big Mac was $3.57 in the United States (varies by store)
2.the price of a Big Mac was £2.29 in the United Kingdom (Britain) (varies by region)
3.the implied purchasing power parity was $1.56 to £1, that is $3.57/£2.29 = 1.56
4.this compares with an actual exchange rate of $2.00 to £1 at the time
5.(2.00-1.56)/1.56 = 28%
6.the pound was thus overvalued against the dollar by 28%

It means that PPP based GDP for UK = factual GDP minus 28% for this index.

[exDemMom]

Thanks for the description.

It does not seem like a very accurate method to me. But then, I’m not an economist.

I assume the actual index is calculated using a composite of goods and services, and not on the price of a single commodity. Because there can be considerable variation on the prices of individual items from region to region.

[cunning_fish]

>>>I assume the actual index is calculated using a composite of goods and services, and not on the price of a single commodity. Because there can be considerable variation on the prices of individual items from region to region.<<<

I don’t think World Bank is using straight Big Mac Index, but the difference with more complex methods is recognized as marginal among many financists.
Making and selling a burger involves numerous industries and services and for that reason it counts as a very accurate method.

[thenewsblogger]

The fact the US GDP calculation includes government spending makes GDP statistics versus other countries totally meaningless. Government spending is NOT production.

[cunning_fish]

>>>The fact the US GDP calculation includes government spending makes GDP statistics versus other countries totally meaningless. Government spending is NOT production.<<<

Well, it makes toxic input but still input into economy.

[green iguana]

GDP - Gross Domestic Product - the value of all goods and services produced within a country’s borders. Official government figures are mostly made up, particularly those of the underdeveloped countries.

PPP - Purchasing Power Parity. The 100% made up, politically correct version of GDP.

[JerseyanExile]

It means adjusting for local cost of goods and services. For a purely American example - someone living in New York earns 100k a year, and someone in Houston makes 75k a year. In theory, the New Yorker is richer, but due to the lower cost of living in Texas, the purchasing power of a dollar goes further.