... measured as the sum of all factor incomes in the economy. GDP may also be measured as the total value added by each firm and govt. department in the economy. GDP can be measured at basic prices or at market prices. GDP does have its advantages in that it is universally used, and therefore makes it easy to compare the GDP of different countries quite easily using numerical values. Despite some of the advantages, there are also disadvantages. One discrepancy which occurs in the use of GDP is in the conversion of local currency into the $ equivalent using the official exchange rate may misrepresent the actual purchasing power in the local economy because of complex forces in foreign exchange markets. A more accurate method of conversion lies in the use of purchasing power parities (PPPs). PPPs measure how many units of one country's currency are needed to buy exactly the same basket ...

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