Comparison with Purchasing Power Parity(PPP)

__Real purchasing power measured in terms of the WCU distinguishes itself from purchasing power in PPP terms in that the latter is focused on purchasing power over goods and services in one country as compared to that in another country, while real purchasing powerin terms of the WCU

 
 

is defined over the same basket of global output. For example PPP would look at how much a big mac would cost in China as compared with the cost in the United States. The WCU on the other hand asks how much the same basket of output, sourced globally from key economies, would cost in RMB and in USD. PPP would be relevant if a person resides and consumes exclusively in a specific economy. WCU would be relevant if a person is widely traveled, and if he spends globally in proportion to the sizes of GDPs in key economies.

 
Copyright 2007-2008 CPPS , Lingnan University. All rights reserved.