What are PPPs?
PPPs are the rates of currency conversion that equalise the purchasing power of different currencies by eliminating the differences in price levels between countries. In their simplest form, PPPs are simply price relatives which show the ratio of the prices in national currencies of the same good or service in different countries. For example, if the price of a hamburger in France is 2.84 euros and in the United States it is 2.2 dollars, then the PPP for hamburger between France and the United States is 2.84 euros to 2.2 dollars or 1.29 euros to the dollar. This means that for every dollar spent on hamburger in the United States, 1.29 euros would have to be spent in France to obtain the same quantity and quality – or, in other words, the same volume – of hamburger.
