Ecuador's GDP per capita in 2017, based on market exchange rates, was $5,600. In that same year, Ecuador's GDP per capita based on purchasing power parity was $11,100. The difference between these two measures of GDP per capita is most likely explained by:
A)Ecuador's dual economy.
B)differences in relative prices between Ecuador and other countries.
C)Ecuador's limited capital account convertibility.
D)credentialism.

Question

Quizplus · Accepted Answer

The difference between GDP per capita based on market exchange rates and purchasing power parity (PPP) is primarily due to differences in relative prices between countries. PPP takes into account the relative cost of living and the inflation rates of the countries, providing a more accurate picture of an individual's purchasing power in their own country.

Ecuador's GDP Per Capita in 2017, Based on Market Exchange