Mnementh said:
The countries measure their economy in their own currency. Which makes international comparisons pretty hard. The video assumes exchange values between the currencies and translates it into Dollar. As Dollar is still the international leading currency, pretty much every other currency is undervalued to the Dollar, which in turn makes the US economy look bigger in comparison. Notice how China is jumping in the last years in the video. That doesn't mean China had suddenly crazy economic growht (they actually had more economic growth in the 80s than the 2000s I think), but the Yuan became stronger valued in comparison to the Dollar, so the economy grew stronger if measured in Dollar. PPP is a way to measure currencies values independently of exchange values. It says pretty much: how much money in the currency I need to buy a given set of products. As Dollar is overvalued in exchange rates, other currencies usually look much better in value if you apply the PPP. And that leads to the result, that based on PPP China is the leading economy for some years now. |
I know what PPP is. What I'm saying is that we don't use PPP for this purpose. PPP is used for standardizing the value of the (in this case) dollar over time. If you apply PPP here, it doesn't change the action of the graph shown in the video.
