Purchasing power parity

Value relations between currencies, purchasing power parities, are calculated by means of price comparisons between countries. Purchasing power parity is the exchange rate calculated by which the price of the commodity basket of two countries is exactly the same converted into the common currency. Purchasing power parity is usually not the same as the actual exchange rate. Purchasing power parity is used to measure the value of the national economy's money on the basis of how much goods and services can be bought with its currency. This provides a more accurate conception of the output of the national economy per capita than by only converting the value of gross domestic product or gross national income (usually) into U.S. dollars or euros.