Mike Bird
Business Insider - Oct 8, 2014
Sorry, America. China just overtook the US to become the world's largest economy, according to the International Monetary Fund.
Chris Giles at the Financial Times flagged up the change. He'd also alerted us back in April this year that it was all about to happen.
Basically, the method used by the IMF adjusts for purchasing power parity, explained here.
The simple logic is that prices aren't the same in each country: a
shirt will cost you less in Shanghai than San Francisco, so it's not
entirely reasonable to compare countries without taking this into
account. Though a typical person in China earns a lot less than the
typical person in the US, simply converting a Chinese salary into
dollars underestimates how much purchasing power that individual, and
therefore that country, might have. The Economist's Big Mac Index is a great example of these disparities.
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