Answer :

PPP- Purchasing power parity is the ratio of purchasing power of the currencies of two trading countries. It is the ratio of the level of price in different nations. So, we can say that the exchange rate between the two countries is equal to the ratio of the price level in the two countries. It can be denoted as

RATE OF EXCHANGE = P1/P2,


where P1 is the price level in country 1, and


P2 is the price level in country 2.


HDI - HDI is the human development index. Human development index was a composite index given by UNDP-United Nations Development Program to measure the progress of a nation in terms of its education, income and health levels. It had three indicators for the same. :


(i) Longevity: It denotes a long and healthy life which is measured by ‘life expectancy at birth’. It indicates how long a newborn baby is expected to live.


(ii) Knowledge: It refers to the literacy rate. It is measured by the percentage of educational attainment, a combined gross enrolment ratio in primary, secondary and tertiary level.


(iii) A decent standard of living: It denotes the standard of life. It is measured by per capita income.


The rank of a country is obtained by the overall achievement in these three basic indicators of human development.


It is an extremely good measure because it is a comprehensive index that covers all the major aspects of life and is used to measure the economic development of a nation.


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