0 votes
asked ago in General Economics Questions by (120 points)

1 Answer

0 votes
answered ago by (2.7k points)
edited ago by
There is an interesting study of purchasing power parity based on a Big Mac. Because of differences between type and characteristics of common goods it's difficult to measure real prices on same goods across regions. It's clear that a Big Mac is the same good/product in all places around the globe. So measure purchasing power parity based on this good it's an awesome idea.

The study reveals that there are different level of wages and prices on house rental that aren't explained by the exchange rate. This makes prices different across countries taking into account the exchange rate of their currency.

So definitely, purchasing power parity doesn't hold for a study between countries. Nominal economic growth can be measured as a percentage of GDP but real growth is very difficult to measure without rates of every kind as education, innovation, poverty, etc...