A common way of measuring poverty in a country is the headcount ratio. Statisticians first

choose a poverty line. This is the threshold below which individuals living in that country would

be poor. This is usually arrived at by figuring out how much would an individual need to spend

to be able to afford a basic basket of goods and services. The World Bank has one such poverty

line. It is one dollar per day. That is individuals living on less than one dollar a day would be

considered poor. Suppose that the number of poor people worldwide is calculated using either

the market exchange rates or the purchasing power parity rates. Which will be larger? Explain

your answer.