Comparing Economic Productivity: PPP allows for a more accurate comparison of economic productivity and living standards between countries. Unlike nominal GDP, which uses current exchange rates and can be volatile, PPP adjusts for the differences in price levels between countries. This ensures that the comparison reflects the actual purchasing power of each currency, rather than just the exchange rate.

Accounting for Non-Traded Goods: PPP considers both tradable and non-tradable goods and services, which is essential for understanding the true cost of living in different countries. Non-traded goods, such as housing, healthcare, and education, are often cheaper in developing countries compared to developed ones. By including these goods, PPP provides a more comprehensive view of economic conditions.

Global Poverty Measurement: As a key tool used by international organizations like the UN, PPP offers an accurate measure of global poverty. By adjusting GDP for PPP, it becomes possible to compare the economic well-being of different countries more accurately, which is vital for assessing and addressing global poverty.

Stability Over Time: PPP exchange rates are generally more stable over time compared to market exchange rates, which can fluctuate significantly due to various economic and speculative factors. This stability makes PPP a reliable metric for long-term economic comparisons.

Broader Perspective on Living Standards: By considering the prices of a broad basket of goods and services, PPP provides a broader perspective on living standards worldwide. This includes not just the cost of traded goods but also the cost of living in terms of non-traded goods and services, giving a more holistic view of economic conditions.

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Top 20 Countries by PPP GDP 11