Briefly define and discuss the importance of considering gross domestic product (GDP), per capita GDP, and per capital expenditure on health care when considering wages and benefits in multiple countries
What role do purchasing power parity (PPP) exchange rates play?
Answer: When discussing compensation in other countries, it is important to note some of the important concepts and measures. First, the gross domestic product (GDP) describes the size of a country's economy. Size is expressed as the market value of all final goods and services produced within the country over a specified period. Per capita GDP generally indicates the standard of living within a country: The larger the per capita GDP, presumably the better the standard of living. For easy comparison, GDP statistics are converted to a single currency based on the purchasing power parity (PPP) exchange rates. That is, these figures indicate the worth of all goods and services produced in the country valued at prices prevailing in the United States. This is the measure most economists prefer when looking at per capita welfare and when comparing living conditions or use of resources across countries.
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