PPP is purchasing power, nominal is just the raw dollar amount. Genuinely interesting once you dig into it — why would purchasing power differ from the nominal figure depending on location at all? A dollar is a dollar. If bread costs $2.50 in the US, why doesn’t it cost $2.50 in Turkey too (roughly 37 lira today)?
Here’s the actual answer: what’s baked into that price is labor, and labor is simply far cheaper in Turkey. Taxi rides are cheap in Turkey; anything labor-intensive is cheap. Meanwhile, anything with imported components — electronics, for instance — costs close to the same dollar amount everywhere, maybe with a bit extra from import tariffs. So bread is cheap because the people making it are paid very little relative to their actual output. A loaf costs 3.5 lira, a computer costs roughly ten times that in lira terms — same dollar-denominated components, wildly different labor cost baked in, because the bread was made by Turkish labor and the computer was made by foreign labor.
To put actual numbers on it: Turkey’s PPP-adjusted GDP figure comes out to roughly $35,624, while nominal GDP per capita is around $9,864. That’s a ratio of about 3.61 — meaning an American visiting Turkey with $100 could buy what would cost them $361 back home. A PPP figure that much higher than the nominal figure is really a signal that labor here is being paid a fraction of its actual output value.
Is there an upside to a high PPP figure? Yes, actually — it reflects real national capacity. If the US can build a space program by spending $361 million, and much of that value is in domestically-produced parts and labor, then in principle a country with cheaper labor could theoretically build the equivalent for a fraction of the nominal dollar cost — the catch being that inefficiency, corruption, or misallocation along the way can easily erase that theoretical advantage in practice.
The short version: total PPP-adjusted GDP tends to reflect a country’s raw economic capacity, while nominal GDP per capita reflects the actual purchasing power an individual citizen experiences day to day. Two very different pictures of the same economy.
Source: Our World in Data — What are PPPs?
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