Question

1. Income per capita is one of several measures of economic development that has been reported over the years.  Answer the following questions about income per capita and the evolution of measuring economic development.

1. If the average annual income per capita in Niger is 210,000 West African Francs and the exchange rate is 600 West African Francs per $1, then what is the annual income per capita in Niger in US dollars? Based on this calculation, is the average person living above or below the absolute poverty line in Niger? Explain your answer.
2. Define Purchasing Power Parity (PPP) in your own words.  If the PPP exchange rate in Niger is 210 West African Francs per $1, then what is the annual income per capita in Niger in US dollars?  Comparing this to your calculations from part A, are the people in Niger doing better or worse than you originally thought?
3. How did Amartya Sen revolutionize the measurement of economic development?  What are the three core values of economic development that we focus on today?

2. We discussed in detail the differences between the demographics of the population and population growth in developing countries compared to those that have already developed. Please answer the following questions with regard to population differences between developed and developing nations.

1. Describe what is meant by the dependency burden.  Compare the dependency burden in developing nations to that of developed ones and describe why the dependency burden is worse for developing countries
2. Developed countries have stricter immigration laws now compared to when they were first developing over 200 years ago.  Name at least one way in which this positively and negatively influences the growth of developing nations
3. Briefly define Population-Weighted Relative Convergence.  Is convergence happening according to this measure?

Answer 1

Solution:

A. The given data are:

Average annual per capita income = 210,000 West African Francs

Exchange rate is 1$ = 600 West African Francs

Hence, annual per capita income is calculated by:

600 = 1$

210,000 = 1$ * 210000/600

= 350$

Hence, from above we can conclude that the average person lis living below the absolute poverty line because according to USA poverty index a person is said to be poor when his monthly income is 980.83$.

B. Purchasing Power Parity (PPP) defines that when the exchange rate of two countries are in equilibrium then the purchasing power will be equal in both the countries.

Given, 210 = 1$

210,000 = 1$ * 210000/210

= 1000$

Hence, from above we can conclude that the people of Niger are doing better.

C. According to Amartya Sen, economic development is more concerned with the improvement in the lives of people and the freedoms they enjoy.

The three core values of economic development that we focus on today are:

• Income per capita or average standard of living.
• Health standard
• Educational levels