Without adjusting for PPP,emerging economies contribute about 30% of the global GDP.Adjusting for PPP,they now contribute approximately 50% of the global GDP.The reason there is a huge difference between the two measures is because
A) the cost of living in emerging economies tends to be lower than that in developed economies.
B) the purchasing power parity is much higher in emerging countries.
C) the population in emerging economies is much higher than that in developed economies.
D) the deficit spending in emerging economies is much larger than that in developed economies.

Question

Without adjusting for PPP,emerging economies contribute about 30% of the global GDP.Adjusting for PPP,they now contribute approximately 50% of the global GDP.The reason there is a huge difference between the two measures is because 
A) the cost of living in emerging economies tends to be lower than that in developed economies. 
B) the purchasing power parity is much higher in emerging countries. 
C) the population in emerging economies is much higher than that in developed economies. 
D) the deficit spending in emerging economies is much larger than that in developed economies.

Quizplus · Accepted Answer

Adjusting for PPP takes into account the fact that the cost of living is generally lower in emerging economies compared to developed economies. This means that the value of goods and services produced in emerging economies is actually higher than what their nominal GDP suggests. This is why adjusting for PPP leads to a higher contribution of emerging economies to the global GDP.

Without Adjusting for PPP,emerging Economies Contribute About 30% of the Global