Comparison of GDP and PPP of Several States
Comparison of GDP and PPP for Several Countries
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Comparison of GDP and PPP of Several States
GDP is defined as the aggregate measure of the production of a state when equated to the gross value of residents living in a particular country. The GDP combines the taxes and subsidies in the value of the outputs of a state. PPP (Purchasing Power Parity) is a constituent of economic theories (Reid, 2013). PPP is a technique used to govern the comparative value of varied currencies. GDP is often used to estimate the economic value and performance of any state. GDP can also be used to estimate the relative industrial contribution to the state economy.
This paper will examine a selected number of five countries and evaluate their GDP as a derivative from PPP calculations. According to the world bank estimates, the United States has a GDP of $ 16800 billion (PPP of $ 16.47 trillion) in 2013, China has an estimated $ 16158 billion($ 13.39 trillion) for the same period, India $ 6774 billion (PPP of $ 4.99 trillion), Japan $ 4624 billion ($ 4.73 trillion PPP) and Germany $ 3493 billion (PPP of $ 3.23 billion) (Chamberlin, 2014).
The American society has almost the PPP and GDP of 2013 almost equal (Reid, 2013). Often, it is almost impossible to find that a state can strike a balance between PPP and GDP. For this reason, it is vital to understand that the Americans embrace their domestically produced products. Most Americans embrace their domestically produced products hence they boost their economy through embracing their own products hence achieving an equilibrium between the GDP and PPP.
The uneven economic status of China and socialist setup of the Republic of China makes it easy for the GDP to surpass the PPP (Chamberlin, 2014). This therefore means that because not all the people in China are affluent, they would rather prefer buying their domestically products that are much cheaper than importing foreign products that may be expensive. Japan has a relatively higher PPP than the GDP for several reasons (Reid, 2013). The first major reason is the affluent level of the Japanese citizens surpasses those of many other countries who have a higher GDP than herself. For this reason, the Japanese citizens have extra cash to import products they demand from other states.
The Chinese problem also affects India. This is because of an almost unequal financial capacity of Indian citizens. There is a great gap between the rich and the poor in India (Xu, 2013). The extremely rich persons are fewer in number while the poor form a large proportion of the Indian society. The concept of the US having more GDP and PPP is the presence of available land for expansion and resources to meet the needs of the citizens (Chamberlin, 2014). This therefore makes it easy to determine the needs of the people thus making them unable to seek for goods or services elsewhere. Germany has a balanced PPP and GDP because of its stable economy and the capacity of its citizens to purchase their own good. This therefore makes it hard for them to import an excess of foreign products thus strengthen the American Dollar or Euro.
To achieve economic prosperity, it is essential for every state to extensively invest in provision of the needs of the citizens and ensuring that the citizens do not seek for economic services elsewhere. The relative value of states is essential in estimation of the purchasing power of a country.
References
Chamberlin, G. (2014). Gross domestic product, real income and economic welfare. Economic & Labor Market Review, 5-25.
Reid, D. (2013). Combining Three Estimates of Gross Domestic Product. Economical, 431-431.
Xu, X. (2013). China’s gross domestic product estimation. China Economic Review, 302-322.
