18. The following table lists 2012 GDP per capita for four countries. The data a

Question

18. The following table lists 2012 GDP per capita for four countries. The data are given in the national currencies of the countries. It also lists the price of a Big Mac burger in local currency in each country in 2012. The price of a Big Mac in the United States in 2012 was $4.20. Using the Big Mac burger as a representative commodity common to the countries, calculate the purchasing power parity (PPP)-adjustment factor for each country, and then the PPP level of per capita GDP in each country 2012 GDP per Capita 579,162 41,398 2012 Big Mac Price Norway (krone) 41 krone 9.1 zloty Poland (zloty) Turkey (Turkish lira) 19,5806.6 Turkish lira United Kingdom (British pound) Source for GDP: UNECE Statistical Database, compiled from national and international (CIS, EUROSTAT, IMF OECD) official sources. Source for Big Mac Prices: http://bigmacindex.org/2012-big-mac- index.html 24,740 2.49 pounds

Explanation / Answer

PPP adjustment factor:

Norway: 4.20 / 41 = 0.102
Poland: 4.20/ 9.1 = 0.462
Turkey: 4.20 / 6.6 = 0.636
United Kingdom: 4.20 / 2.49 = 1.687

PPP level of GDP per capita:

Norway: 0.102 x 579162 = 59075

Poland : 0.462 x 41398 = 19125.876

Turkey: 0.636 x 19580 = 12452.880

United kingdom : 1.687 x 24740 = 41736.380

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