Background
Using a PPP basis is arguably more useful when comparing generalized differences in total economic output between countries because PPP takes into account the relative costs and the inflation rates of the countries, rather than using just exchange rates which may distort the real differences in income. Economies do self-adjust to currency changes over time, and technology intensive and luxury goods, raw materials and energy prices are mostly unaffected by difference in currency (the latter more by subsidies), however this is taken into account by the price comparison surveys, such as the International Comparison Program, which are used as the basis for PPP calculations. These surveys include both tradable and non-tradable goods in an attempt to estimate a representative basket of all goods.
Read more about this topic: List Of Countries By GDP (PPP)
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