To measure the real size of the world’s economy and to compare costs of living across coun¬tries, we need to adjust for differences in purchasing power. Finding a way to adjust for those differences has given rise to the efforts to measure purchasing power parities (PPPs), which convert local currencies to a common currency, such as the U.S. dollar. Purchasing power parities are needed because similar goods and services have widely varying prices across countries when converted to a common currency using market exchange rates. Differences are greatest in sectors not commonly traded in¬ternationally, such as housing, construction and health and education services. Price differences are smaller for widely traded products, such as machinery and equipment, af¬ter allowing for taxes, distributor margins and transport costs. PPPs include the prices of tradable and nontradable goods, us¬ing weights that reflect their relative importance in total