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GDP is a well-respected, clear assessment of the wealth of a nation’s economy. Advantage of China Economic. Per Capita Income is defined as National Income/ Total Population Per Capita Income is not a reliable measure for measuring Economic development of a country because of the following reasons: 1. Per capita income is an average and this average may not represent the standard of living of the people, if the increased national income goes to the few rich instead of giving to the many poor. This has been a guide to what is Real GDP Per Capita and its definition. Student videos. GDP per capita is the gross domestic product of a country, as divided equally between each citizen (capita)Advantage - represents a country's economic productivity and the advancement of its industryAdvantage - easy to rank and measureDisadvantage - doesn't include the contributions of the informal economy (70% in African cities)Disadvantage - can hide inequalities within a nation (e.g… ILLUSTRATION 2.3: Limitations and drawbacks include the following: One of the disadvantages if the real GDP per capita is that it does not take into consideration the cost of living of the person of their country into account while calculating it. In fact, "standard of living" and "per capita GDP" have come to be virtually synonymous. China makes a huge number of iPhones but the majority of people living their can’t afford them; Government could adjust figures to gain power; Production process could be immoral, high GDP could be down to trading drugs or guns Due to this Real GDP per capita does not tell the exact details of the average income of the country per citizen in a year. However, this tells you nothing about the distribution, potential, or sustainability of the economy. The reason behind the importance of environmental indicators. GDP per capita is often used as an indicator of welfare in an economy. Get Revising is one of the trading names of The Student Room Group Ltd. Register Number: 04666380 (England and Wales), VAT No. One can tell from a country's GDP per capita how it performs economically relative to other countries and how it is performing overtime. Similarly, while GDP per capita is not a country’s measure of personal income, it can be used to make observations about it. Although the GDP per capita of a country may be very high, it may be the case that 10 percent of the country earn millions of times more than the other 90 percent of the country's inhabitants, who earn extremely low … Three Advantages of using GDP/ GNP/ GNI as an indicator of development 1. Comparing cross-country data can indicate human welfare distribution. So wealth distribution cannot be seen with the help of the Real GDP per capita. Change in per capita gdp is a pure measure of productivity because it controls for population size. Thus unless national income is evenly distributed, per capita income cannot serve as a … As a result of globalization, we all enjoy many advantages. Calculate the Real GDP per capita of the country under consideration for the year 2018. Real GDP per capita calculates an average figure, due to this it is not possible to get the output from it regarding the distribution of the income among the people of the country i.e., it does not tell that how the wealth is spread in the country. It refers to the measurement of total economic output in a country during a specified period divided by the total number of population of the country during the same period and considers the inflation prevailing at that point of time which helps in measuring the actual level of increase in the goods and services during the period of time in the company. Is it time to end our fixation with GDP and growth? For example in a country, Real GDP for the year 2018 is $ 10 trillion and during the same year, the total population of the country is 250 million i.e., there are 250 million people in the country during the year 2018. Therefore, GDP may overestimate living standards in a country. GDP and GDP Per Capita. There are several "disadvantages" if that's what you want to call them. (Source: John Sloman, 2006) CFA Institute Does Not Endorse, Promote, Or Warrant The Accuracy Or Quality Of WallStreetMojo. The advantages and disadvantages of using cap-and-trade approach in implementing environmental regulations for controlling pollution and resource use. Using GDP as an indicator of economic welfare and performance has its’ advantages and disadvantages. In 1980, when China and India in the gross domestic product (GDP) per capita more or less equal, China has enjoyed a strong advantage in manufacturing. Real GDP reflects the value which has been adjusted for inflation while nominal GDP reflects the value without considering inflation (Abel, Bernanke and McNabb, 1998). GDP per capita is an average, and thus ignores the distribution of incomes in a given country. GDP or gross domestic product has always served as the most important factor in the calculation of the overall economic condition of the citizens, their standard of living and growth. Fifty years ago, the city-state of Singapore was undeveloped and lacks both arable land and natural resources with a GDP per capita of less than US $320. GDP per capita is a measure that results from GDP divided by the size of the nation's overall population. GDP per capita is measured when GDP is divided by the number of people in the country. From the Blog. While calculating the Real GDP per capita, inflation prevailing at that point of time is also considered which helps in measuring the actual level of increase in the goods and services during the period of time in the company as it excludes any impact which arises due to the rising of the prices in the country. |~ », Easy to compare as the population of a country is taken into account, Gives good figures, so world leaders know where to spend money, Good indicator to show provision of services, Doesn't take the cost of living into account, Illegal workers and volunteers aren't included. It is hard to determine if consumers are receiving quality goods that do not cause them more money to replace a low-good with a higher-quality good. [Year 12 Enrichment Task] 21st May 2020. When country GDP per capita is calculated, it is done by dividing the nominal or real GDP by the country’s population. Get Revising is one of the trading names of The Student Room Group Ltd. Register Number: 04666380 (England and Wales), VAT No. Per capita GDP tells you, on average how much output each person provides to the economy, and is therefore a measure of economic health. So, a major advantage of GDP is that it gives a clear indicator as to how well (or badly) an economy is doing. technology products, pharmaceutical, consumer electronics, and on a sector of growing financial service. In 2016, the GNP per capita in the UK was $43000 while in India it was only $1600. Please i need some help », Can I please get some hand here? Although GDP is easy to compare, it shows which countries are rich and poor, not which countries need specific funding from the UN. Relative to other countries and how it is also a fairly decent indicator welfare! Helps in doing the comparison easy as the country is $ 35 100 was!, proper analysis of the Real GDP per capita GDP '' have come be... Uk was $ 43000 while in India it was only $ 1600 when GDP is a indicator... 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Overall output of your domestic factories Copyright © 2020 behind a high GDP rate country..., potential, or Warrant the Accuracy or Quality of WallStreetMojo is calculated, it is overtime. Show how wealth is spread, as there could be a better way to measure economies than,! –, Copyright © 2020, Copyright © 2020 not show the distribution of incomes in given. Analysis of the wealth of a country 's GDP per capita is a reasonable measure economic! An example, advantages, there are also many criticisms on GDP a... Show the distribution of incomes in a country 's GDP per capita is often used as an:.

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