# Purchasing Power Parity (PPP) Calculator

Looking for a PPP calculator to compare purchasing power between 2 currencies? Using our PPP calculator by country makes it easy to adjust exchange rates and determine the true value of different currencies. Purchasing Power Parity (PPP) Calculator is a free online tool that helps you compare your income or expenditure across different countries or regions using the concept of purchasing power parity.

You require a salary of _______ in local currency to live a similar quality of life as you would with a salary of _______ in local currency..

## What is a Purchasing Power Parity? (2024)

The full form of PPP in economics is Purchasing Power Parity. PPP is used to compare your country or local currency with other target countries. By using PPP, you can find out the cost of the standard of living in the target country and determine the value of your local currency in that country to maintain or improve your lifestyle.

Definition: purchasing power parity (PPP) is a popular metric used by macroeconomic analysts that compare different countries’ currencies through a “basket of goods” approach. According to this concept, two currencies are in equilibrium known as the currencies being at par when a basket of goods is priced the same in both countries, taking into account the exchange rates.

Meaning: Economists use purchasing power parity (PPP) to measure how much different currencies can buy. This means that two currencies have the same value also called being at par when they can purchase the same amount of goods and services in both countries, after adjusting for the exchange rates.

S= Exchange rate of currency 1 to currency 2
P1​= Cost of good X in currency 1
P2​= Cost of good X in currency 2​

Example: Imagine you want to buy a burger. In one country, the burger costs 5 dollars. In another country, the burger costs 10 euros. The exchange rate is 1 dollar = 2 euros. Purchasing power parity means that you can buy the same burger for either 5 dollars or 10 euros because they have the same value. If the exchange rate changes, then the value of the currencies changes too. For example, if 1 dollar = 1 euro, then you can buy two burgers for 10 euros, but only one burger for 5 dollars. That means the euro has more purchasing power than the dollar.

## How PPP Calculate Work?

The PPP Converter is an online tool that calculates purchasing power parity (PPP) by comparing the exchange rates of all countries. The PPP calculator provides output based on the updated exchange rates of all countries and is linked to the official World Bank API. All the outputs generated by this tool are sourced from the World Bank’s API and data.

The calculator determines the purchasing power of a target country by comparing its currency with the exchange rate, and displays the desired amount in the output. This allows you to determine how much of your local currency is needed in another country to maintain the same standard of living.

## How to Use PPP Calculator?

The PPP calculator is very user-friendly and can be used on smartphones and tablets. With this tool, you can compare your salary in your currency with that of another country. This will allow you to determine how much money you would need in the other country to maintain your standard of living.

The PPP calculator is an online tool that can be accessed on your device. You can use it to calculate the cost of living in any country worldwide, based on the current exchange rate. Let’s see how you can use it.

1. Go to the homepage of the PPP calculator.
2. Select your home (Source) country.
3. Enter the salary amount or currency of the Local country.
4. Select the country you want to compare purchasing power with.
5. The value (Output) of the respective currency will be displayed in the output.

### Advantages of using a PPP Calculator

• It can help you adjust for differences in price levels across countries when comparing income or expenditure indicators.
• It can help you avoid misleading comparisons based on nominal exchange rates that may not reflect the actual value of currencies.
• It can help you understand how changes in prices or exchange rates affect your real income or expenditure over time.

### Disadvantages of using a PPP Calculator

• It may not capture all aspects of economic well-being or competitiveness that go beyond income or expenditure indicators, such as quality of life, human development, environmental sustainability, etc.
• It may not account for differences in non-market goods and services that affect economic well-being or competitiveness, such as public goods, and social services.

Purchasing power parity can affect you in different ways, depending on whether you are a consumer, a producer, a trader, or a policy maker.

### As a Trader or an Investor

Purchasing power parity can affect your returns and risks when you deal with foreign currencies or assets. If your currency has more purchasing power than another currency, you may expect that the exchange rate will adjust over time to reflect the difference in price levels, leading to a depreciation of your currency and a loss of value for your foreign assets.

Conversely, if your currency has less purchasing power than another currency, you may expect that the exchange rate will adjust over time to reflect the difference in price levels, leading to an appreciation of your currency and a gain of value for your foreign assets.

### As a Policy Maker or an Analyst

Purchasing power parity can affect how you measure and compare economic performance and well-being across countries. If you use nominal exchange rates to convert GDP or other indicators from different currencies into one common currency (such as the U.S. dollar), you may overstate or understate the actual size and growth of economies that have different price levels than the base country.

If you use PPP exchange rates to convert GDP or other indicators from different currencies into one common currency (such as the Purchasing Power Standard), you may eliminate the effect of price level differences and obtain a more accurate picture of economic productivity and standards of living across countries.

## Purchase Parity Index

Total, National currency units/US dollar, 2010 – 2021. This indicator is measured in terms of national currency per US dollar.

## FAQ

What is a purchasing power parity calculator?

A purchasing power parity calculator is a tool that allows you to convert your income or expenditure from one currency to another using the concept of purchasing power parity (PPP). PPP is an economic theory that compares the prices of goods and services across countries, taking into account the exchange rates.

Why use a purchasing power parity calculator?

A purchasing power parity calculator can help you compare your standard of living or economic performance with other countries or regions. For example, you can use it to see how much you can buy with your salary in another country, or how much your GDP per capita is relative to other countries.

How does a purchasing power parity calculator work?

A purchasing power parity calculator works by using PPP exchange rates, which are based on the prices of a basket of goods and services that are representative of each country’s consumption patterns. PPP exchange rates are different from nominal exchange rates, which are based on the market supply and demand of currencies. PPP exchange rates reflect the actual purchasing power of currencies, while nominal exchange rates may be affected by factors such as inflation, interest rates, speculation, etc.

Where can I find a purchasing power parity calculator?

There are several online sources that provide purchasing power parity calculators: – https://pppcalculator.pro/

How accurate is a purchasing power parity calculator?

A purchasing power parity calculator is only as accurate as the data and assumptions that it uses. There are several challenges and limitations in measuring and comparing PPP across countries.

## Conclusion

We hope that you have found our purchasing power parity calculator useful and informative. Our goal is to provide you with a simple and reliable tool that can help you compare your income or expenditure across different countries or regions using the concept of purchasing power parity. Purchasing power parity is an economic theory that compares the prices of goods and services across countries, taking into account the exchange rates.

By using PPP exchange rates, you can adjust for differences in price levels and get a more accurate picture of your economic well-being or competitiveness. However, please note that PPP is not a perfect measure and it has some limitations and challenges. Therefore, you should use our calculator with caution and awareness of its assumptions and data sources. If you have any questions, feedback, or suggestions, please feel free to contact us. Thank you for visiting our website.