What is GDP nominal, real, PPP
 

Please explain these terms so that a layman like me could understand. I have been trying to understand these by listening to lectures online, but haven't been able to fully grasp these concepts. Thanks in advance. :bow

Salam brother,

Let's understand these concepts in most simplistic way.assume there is a country A.this country produced two items (finished goods) of worth 10 ruppees , an egg(4 ruppes) and an apple(6 ruppes). Now the total GDP of county A would be 10 ruppees.it is nominal GDP.now suppose we adjust it according to inflation, that a year earlier, the price of apple was 5 and that of egg was 3.this adjusted GDP 8 ruppes would be real GDP .



Now suppose there are countries B and C.the price of egg and apple is 8 yuan and 12 Yuan respectively in country B anrd 2 dinar and 4 dinarin country C.
Purchasing power parity means that the bundle of goods value would be compared in single currency.for instance GDP of country B is 20 yuan but in PPP its GDP would be 10 ruppes (as it produces one egg and one apple as finished goods.we took ruppes as standard international currency.PPP is more convenient as compared to exchange rates

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[QUOTE=qublai khan;935126]Salam brother,

Let's understand these concepts in most simplistic way.assume there is a country A.this country produced two items (finished goods) of worth 10 ruppees , an egg(4 ruppes) and an apple(6 ruppes). Now the total GDP of county A would be 10 ruppees.it is nominal GDP.now suppose we adjust it according to inflation, that a year earlier, the price of apple was 5 and that of egg was 3.this adjusted GDP 8 ruppes would be real GDP .



Now suppose there are countries B and C.the price of egg and apple is 8 yuan and 12 Yuan respectively in country B anrd 2 dinar and 4 dinarin country C.
Purchasing power parity means that the bundle of goods value would be compared in single currency.for instance GDP of country B is 20 yuan but in PPP its GDP would be 10 ruppes (as it produces one egg and one apple as finished goods.we took ruppes as standard international currency.PPP is more convenient as compared to exchange rates

Sent from my T480 using Tapatalk[/QUOTE]

W.Salam brother. Thank you so much for explaining these in such a simple and effective way. JazakAllah