Question

craft an initial response that analyzes the intersection between GDP per capita growth and living standards

Answer 1

GDP is the market value of all goods and services produced with the domestic territory of a country during an accounting year. GDP percapita is the GDP per person. It is the share of total GDP that goes to each individual. GDP percapita can be calculated by dividing the total GDP with population.

The GDP percapita is an important sign of economic prosperity. A higher GDP percapita indicates higher living standard of the citizens. The GDP percapita compares economic wellbeing of the nations. The countries with higher GDP percapita is termed as developed countries while countries with low GDP percapita is treated as underdeveloped countries. The GDP percapita and living standard of the people are positively interrelated. A higher level of GDP percapita means the country is producing more and the standard of living of the people is rising. While a lower level of GDP percapita is the indicator of the bad performance of the economy and low living standard for the citizen.

The growth of GDP percapita is influenced by many factors. The factors that influence the growth of GDP per capita are:

1. Human Resource.

The human resource is one of the major determinants of growth in GDP. Both quality and quantity of human resources affect the growth of GDP and thereby the GDP percapita. The countries having large qualified population maintain a high level of GDP. In such countries the GDP percapita and the living standard both will be high.

2. Natural Resources.

The availability of natural resources also influences the GDP and living standard. If a country is endowed with abundant natural resources, it will have comparatively higher GDP and GDP percapita. The gulf countries are endowed with the abundance of crude oil and in such countries the GDP percapita is comparatively high.

3. Capital formation.

The rate of capital formation increases the productivity of the nation. The high rate of capital formation leads of higher GDP percapita and living standard of the people.

4. Technological improvement.

Technological improvement increases the productivity of available factors. The improvement in technology reduces the cost and increase the productivity of labour and other factors. Thus the countries succeeded in adopting improved technology will have high GDP percapita and high standard of living.

5. Social and political factors.

The last but not least in the list of factors of GDP growth is social and political factors. A country having conventional belief and thought registers low level of GDP percapita. Political stability also influences the growth in GDP percapita. The frequent changes in government and the changing policies affect badly the business investment in the economy. Thus political stability and the modern outlook of the society is the crucial factor in determining the GDP percapita growth.

In most of the developed countries, the above mentioned factors are favourable. They are highly successful in increasing their GDP percapita.

The increased GDP percapita ensures increased higher level of consumption in such countries. This high consumption increases the standard of living of the citizens. In such countries the unemployment rate will be low; the government is supplying more public utility services. All these are the result of increased GDP percapita that these countries could achieve. In short a higher level of GDP percapita maintains a higher level of living standard.