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In: Economics

One of the most frequently referred to National Income Accounts is GDP. A chart in Chapter...

One of the most frequently referred to National Income Accounts is GDP. A chart in Chapter 26 Indicates that GDP per capita in the United States is about 4 times that of China. Does that mean that people in the United States are 4 times as well- off as those in China? Explain.

Solutions

Expert Solution

GDP per capita is the aggregate measure and it is not individualistic in nature. Though, a higher GDP per capita one country can be assessed as a higher purchasing power of the consumers of that country, in comparison to the country with lower GDP per capita as people with higher GDP per capita, can buy more health facilities, higher quality goods, more access to the innovative products and superior quality of life. It is also transformed into a lower mortality rates and higher value of quality of life. But, the superiority in getting well off, will not be exactly equal to the number of time of the GDP per capita of one country over the other country. It happens, because of the presence of different kind of regulations, different size of infrastructure, size of human capital pool and other dimensions of the country.

So, a higher GDP per capita of the USA over the Chins is an indication of people in the USA to be well off than that of China, but it is not equal to the 4 times as indicated in the given scenario. Wellbeing, depends upon many other factors  as mentioned above, that are country specific and GDP per capita alone, does not explain these factors.


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