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Home > Haiti Economy > Haiti GDP - Gross Domestic Product Haiti GDP - Gross Domestic Product In 2004 the purchasing power parity of Haiti was estimated at $12.05 billion
What is GDP?
Haiti's gross domestic product, or GDP, is one of several measures of the size of its economy. The GDP of Haiti is defined as the market value of all final goods and services produced within Haiti in a given period of time.
Until the 1980s the term GNP or gross national product was used. The two terms GDP and GNP are almost identical.
The most common approach to measuring and understanding GDP is the expenditure method:
GDP = consumption + investment + government spending + (exports − imports)
What is Purchasing power parity?
In economics, purchasing power parity (PPP) is a theory which says that the long-run equilibrium exchange rate of two currencies is the rate that equalizes the currencies' purchasing power. This theory is based on the law of one price, the idea that, in an efficient market, identical goods must have only one price.
Purchasing power parity is often called absolute purchasing power parity to distinguish it from a related theory relative purchasing power parity, which predicts the relationship between the two countries' relative inflation rates and the change in the exchange rate of their currencies.
A purchasing power parity exchange rate equalizes the purchasing power of different currencies in their home countries for a given basket of goods. These special exchange rates are often used to compare the standards of living of two or more countries. The adjustments are meant to give a better picture than comparing gross domestic products (GDP) using market exchange rates. This type of adjustment to an exchange rate is controversial because of the difficulties of finding comparable baskets of goods to compare purchasing power across countries.
Market exchange rates fluctuate widely, but many believe that PPP exchange rates reflect the long run equilibrium value. The distortions caused by using market rates are accentuated because prices of non-traded goods and services are usually lower in poorer economies. For example, a US dollar exchanged and spent in the People's Republic of China will buy much more than a dollar spent in the United States.
The differences between PPP and market exchange rates can be significant. For example, the World Bank's World Development Indicators 2005 estimates that one United States dollar is equivalent to approximately 1.8 Chinese yuan by purchasing power parity in 2003. [1]. However, based on nominal exchange rates, one US dollar is currently equal to 7.96 yuan. This discrepancy has large implications; for instance, GDP per capita in the People's Republic of China is about USD 1,800, while on a PPP basis it is about USD 7,204. China is the world's fourth largest economy in terms of US dollar nominal exchange rates, but it is the second largest economy based on PPP figures. At the other extreme, Japan's nominal GDP per capita is around USD 37,600, but its PPP figure is only USD 30,615.
Estimation of purchasing power parity is complicated by the fact that countries do not simply differ in a uniform price level; rather, the difference in food prices may be greater than the difference in housing prices, while also less than the difference in entertainment prices. People in different countries typically consume different baskets of goods.
It is necessary to compare the cost of baskets of goods and services using a price index. This is a difficult task because purchasing patterns and even the goods available to purchase differ across countries. Thus, it is necessary to make adjustments for differences in the quality of goods and services. Additional statistical difficulties arise with multilateral comparisons when (as is usually the case) more than two countries are to be compared.
If you want to know more about GDP read Gross domestic product on Wikipedia
If you want to know more about Purchasing Power parity visit read more on Wikipedia
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