Paper 3 · national income and standard of living
National income comparisons between countries are often adjusted for differences in relative price levels and the cost of living, using an adjustment known as ______.
Model answer
purchasing power parity
Also accepted: ppp, purchasing power parity (ppp)
Explanation: Purchasing power parity converts national income figures using relative purchasing power rather than market exchange rates, making cross-country comparisons of living standards more meaningful.
Derived from ZIMSEC Economics Paper 3, June 2004, Q6
