Economic & financial indicators

Economic size

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The simplest way of comparing the size of economies is to convert GDP into a common currency, using market exchange rates. However, this neglects differences in relative prices: non-tradables are usually cheaper in poor countries than in rich ones. Adjusting for differences in purchasing power, poor countries have relatively bigger GDPs.

This article appeared in the Economic & financial indicators section of the print edition under the headline “Economic size”

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