The history behind 15 largest economies in the world by 2015 PPP and how each one of them became a part of that exclusive club is quite interesting. The Industrial Revolution of the 1700’s to the 1800’s has transformed the way people manufacture and produce goods. From largely manual production, simple machines such as the cotton gin revolutionized manufacturing and efficiency of workers, leading to an increase in income and production. As the world caught up, global output and income increased, leading to higher standards of living worldwide.
As we take a look at the 15 largest economies of the world by 2015 PPP, we must first define what PPP (purchasing power parity) is, and its difference to GDP as a measure of a country’s economy. Many of us are already familiar with GDP, which is defined by the OECD as “an aggregate measure of production equal to the sum of gross values added of all resident institutional units engaged in production.” Meanwhile, purchasing power parity is defined as the ratio of one country’s currency to buy a certain number of good in that country to another country’s currency to buy the same number of goods in that country. This concept allows an estimate of the exchange rate between two countries if the currency’s purchasing power would be at par with one another. This helps minimize false comparisons of output if two countries were to compare their respective production with the use of market exchange rates. However, the use of PPP is controversial as there are difficulties in finding a suitable “basket of goods” to compare in each country. Thus, several indexes have been proposed, which have a somewhat similar methodology as the PPP. Some of these are the Big Mac index and the iPad index, just to name a few.
To rank the 15 largest economies in the world by 2015 PPP, Insider Monkey obtained 2014 data from the IMF, World Bank and CIA Factbook reports for 2014. Projected GDP growth for 2015 was obtained from the IMF 2015 report. Compared to 2014, there have been some changes in the ranking of each country, with some gaining spots and some losing them. GDP for 2015 was then computed using 2014 GDP and the projected GDP growth for 2015. With an estimated PPP of $107 trillion for 2015, the 15 largest economies in the world by 2015 PPP contribute almost 50% to this value.
Don’t be surprised to see the 10 richest countries in the world by 2015 GDP in this list, as many of these countries produce a vast amount of goods that increase their PPP valuation. However, as we have mentioned earlier, PPP is the valuation of produced goods in a standardized currency, in this case, the US dollar. Without delaying further, let us take a look at the largest economies in the world ranked by 2015 PPP.