Question

In: Economics

Using GDP per capita to compare living standards in different countries a. does not account for...

Using GDP per capita to compare living standards in different countries

a.

does not account for big differences in the distribution of income in these countries.

b.

overlooks the fact that China has a huge population and Norway is very small.

c.

is such a poor measure that economists do not use it anymore.

d.

shows you that America has the highest standard of living in the world.

Owning stock in a company

	a.	represents part ownership in the company.
	b.	allows you to vote in the annual meeting
	c.	gives you equity in a company
	d.	all of these are true.

An increase in the nominal GDP per capita

	a.	means the country is producing more real goods and services per person.
	b.	is always a good thing.
	c.	none of these answers are correct.
	d.	says nothing about actual output increase.

The supply and demand for loanable funds market determines

	a.	the nominal interest rate.
	b.	the size of government budget deficits.
	c.	the real interest rate and the quantity of loanable funds.
	d.	how high the stock market will go.

Expert Solution

Question : Using GDP per capita to compare living standards in different countries

Solution : a. does not account for big differences in the distribution of income in these countries. Correct. Gdp per capita = Total National Income / Total population. So, its an average estimate which does not consider the outliers or the extreme values of the income Thus big differences in the distribution of income in these countries. For eg. in America a person may have $ 10000 as income per annum as other person in the same country may have $500000 as income per annum and the country may have GDP per capita as $ $95000, which does not accurately account for the differences in the distribution of income.

b. overlooks the fact that China has a huge population and Norway is very small. - incorrect. Gdp per capita = Total National Income / Total population. So it measures the income per capita with respect to the population of the concerned country. So, it considers the fact that China has a huge population and Norway is very small .

c. is such a poor measure that economists do not use it anymore - incorrect. Gdp per capita is the best measure to measure the standard of living of any country according to the economists and they use it the most now also.

d. shows you that America has the highest standard of living in the world. - incorrect. As per the statistics of 2020, Luxemburg has the highest standard of living based on per capita nomilnal GDP i e. $109602 . America ranks fifth with the per capita GDP of $63051

Hence, Using GDP per capita to compare living standards in different countries does not account for big differences in the distribution of income in these countries.

Rahul Sunny answered 2 years ago

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