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Concepts and definitions

Basic heading

Basic heading means the lowest level of aggregation of items in the GDP breakdown for which purchasing power parities are calculated.

Equi-representativity

Equi-representativity means a property required of the composition of the item list for a basic heading, each Member State being able to price that number of representative

products which is commensurate with the heterogeneity of the products and price levels covered by the basic heading and its expenditure on the basic heading.

Price level index

The price level index indicates the price levels of different countries relative to a chosen country or a country group (e.g. Finland =100, EU27 =100). If the price level index of a country is higher than 100, the country is more expensive than average, and vice versa. The price level index is derived by dividing the purchasing power parity by the exchange rate of the euro and the monetary unit of the country concerned.

Purchasing Power Standard

Purchasing Power Standard (‘PPS’) means the artificial common reference currency unit used in the European Union to express the volume of economic aggregates for the purpose of spatial comparisons in such a way that price level differences between the Member States are eliminated.

Purchasing power parity

Value relations between currencies, purchasing power parities, are calculated by means of price comparisons between countries. Purchasing power parity is the exchange rate calculated by which the price of the commodity basket of two countries is exactly the same converted into the common currency. Purchasing power parity is usually not the same as the actual exchange rate. Purchasing power parity is used to measure the value of the national economy's money on the basis of how much goods and services can be bought with its currency. This provides a more accurate conception of the output of the national economy per capita than by only converting the value of gross domestic product or gross national income (usually) into U.S. dollars or euros.

Spatial adustment factor

Spatial adjustment factors mean factors used to adjust average prices obtained from one or more locations within the economic territory of a Member State to national average prices.

Temporal adjustment factor

Temporal adjustment factors mean factors used to adjust average prices obtained at the time of survey to annual average prices.