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Comparing Countries GDP's

Many countries use similar approaches to calculating GDP, thus allowing us to use these measures for comparison. Per capita GDP is also used to measure a nation's income. It is as follows:

Per Capita GDP = GDP/Total Population of the Country

Developing countries are often not reflected in the same way as developed countries when looking at GDP. The way they live, such as farming, making their own clothes and shelter, and growing their own crops, do not show up in GDP and thus are not accurately reflected. What costs someone $1000 in the United States for one month might provide someone in a developing country with several months worth of food and shelter.

In order to adjust for the various discrepancies among GDP's, a concept called purchasing power parity is used.  This doctrine states that countries must charge the same price for the same product or service in order to limit the ability of profit-seekers.  This is a concept used to equalize the ratio between two country's exchange rates and their price level of a certain good or service for which they are comparing.

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