Question

Take a look at Table 8-4. Provide a possible explanation of why per capita GDP based on purchasing power parity is higher in China and Indonesia than GDP based on foreign exchange rates.

Short answer

Per capita GDP based on purchasing power parity is higher in China and Indonesia than GDP based on foreign exchange rates.

Step-by-step solution

Introduction

It is because the purchasing power parity thinks about the average expense for most regular things of people so GDP considering buying power equality becomes higher.

Explanation

This is in light of the fact that the purchasing power parity considers the expense for most ordinary things for people, the expense for most regular things for people is a ton lower in China and Indonesia stood out among various countries. The statute according to which product ought to sell at a comparative expense in every country derives that the nominal conversion standard reflects contrasts in cost levels.