Purchasing power parity,

Definition of Purchasing power parity:

1. Economics concept that exchange rates between currencies should be based on their relative purchasing power in their domestic markets for a fixed basket of goods and services. In practice, however, relative interest rates and trade position have more effect than the purchasing power of the currencies.

Purchasing Power Parity

Purchasing power parity is a way of adjusting GDP for the fact that the price of the same product varies from country to country: with one US dollar you can buy four or five times as much in China or India as in the United States.