GDP per capita
A. Is equal to a nation’s GDP divided by its population.
B. Does not permit comparisons of the economic welfare of different nations.
C. Is real GDP corrected for price level changes.
D. Indicates the most efficient use of resources.
The correct answer and explanation is :
Correct Answer: A. Is equal to a nation’s GDP divided by its population.
Explanation (300 words):
Gross Domestic Product (GDP) per capita is a widely used economic indicator that measures the average economic output per person in a country. It is calculated by dividing a nation’s total GDP by its total population. In formula terms: GDP per capita=Total GDPPopulation\text{GDP per capita} = \frac{\text{Total GDP}}{\text{Population}}
This measure is useful because it gives a rough estimate of the average income or economic well-being of individuals in a country. While it does not account for income inequality or the cost of living, it still serves as a helpful indicator for comparing the standard of living across different countries or regions.
Let’s examine why the other options are incorrect:
- Option B is incorrect because GDP per capita does allow comparisons between nations. While it’s not perfect—because it doesn’t adjust for cost of living or income distribution—it still gives a useful general comparison of economic welfare between countries.
- Option C refers to real GDP, which is GDP adjusted for inflation (price level changes), not GDP per capita. Real GDP per capita does exist, but the term “GDP per capita” by itself does not imply adjustment for inflation.
- Option D is incorrect because GDP per capita doesn’t directly measure efficiency or how well a country uses its resources. It simply measures average output per person. Resource efficiency would be better analyzed through productivity metrics or total factor productivity (TFP).
In summary, GDP per capita is a straightforward calculation: the total economic output divided by the number of people. It provides a snapshot of the economic productivity and average wealth in a nation, making it useful for comparisons and analysis, though not without limitations.