How is cost of living in UK compared with Europe, the Netherlands?
First there is the cost of living. To make a fair comparison you cannot simply convert the GBP to the euro or vice versa. We need an exchange rate that equalizes the purchasing power of the currencies. One way to do this is to take a basket of goods (e.g. a bread) and services (e.g. a haircut) and determine how much these would cost in the UK and compare this to how much these would cost in a euro area country, The Netherlands in this case. If we do that we have an artificial exchange rate that represents the purchasing power of the currency. This is a bit simplified explanation of the principle of purchasing power parity. In reality prices of goods and services in a country are compared to what they cost in the US. Purchasing power parity can be used to compare wealth between nations, but also price levels. Comparative price levels are defined as the ratios of PPPs for private final consumption expenditure to exchange rates. Many institutions publish lists with comparative price level
