Country's nominal GDP vs. Purchasing power parity GDP - difference

What is the difference between country's nominal GDP and purchasing power parity GDP ? Why there are different values ?
25 Apr 2021 at 03:34 PM
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florisfloris
Nominal GDP is a basic measurement of economic production in an economy. It is using current prices and is unadjusted for inflation. When GDP is adjusted for inflation, it is called Real GDP.

Purchasing power parity GDP is also know as "GDP PPP". It takes into account the relative cost of local goods, services and inflation rates. GDP PPP is adjusted by purchasing power parity index, to better compare economic productivity and standards of living between countries.

For example:
Country A and Country B are having the same Nominal GDP.
If all the same or comparable goods and services are cheaper in Country B, it means it is increasing its GDP PPP.

Top 7 countries by Nominal GDP in 2019:
1. USA - 21.43 trillion USD
2. China - 14.73 trillion USD
3. Japan - 5.08 trillion USD
4. Germany - 3.86 trillion USD
5. India - 2.87 trillion USD
6. UK - 2.83 trillion USD
7. France - 2.72 trillion USD

Top 7 countries by Purchasing power parity GDP in 2019:
1. China - 23.39 trillion USD
2. USA - 21.43 trillion USD
3. India - 9.54 trillion USD
4. Japan - 5.45 trillion USD
5. Germany - 4.67 trillion USD
6. Russia - 4.14 trillion USD
7. Indonesia - 3.33 trillion USD
30 Apr 2021 at 12:20 PM
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BenBen
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