Without adjusting for "purchasing power parity", real GDP tends to understate income in developing economies by

Question

Quizplus · Accepted Answer

Real GDP only includes market transactions, while non-market transactions such as subsistence farming, home production, and bartering are common in developing economies. These activities are not included in real GDP calculations and therefore lead to an understatement of income. Adjusting for purchasing power parity also takes into account differences in the cost of living and provides a better comparison of living standards across countries. The other options do not necessarily relate to the accuracy of real GDP in measuring income in developing economies.

Without Adjusting for "Purchasing Power Parity", Real GDP Tends to Understate