ECON 102 Chapter Notes - Chapter 1: Political Freedom, Income Distribution
Document Summary
Problems of using gdp per capita to make comparisons of economic welfare. Gdp converted into dollars is used to compare economic welfare in one country with that in another. Three special problems arise in making these comparisons: exchange rate fluctuations can mean major changes in comparisons on a year to year basis. Gdp of one country must be converted into the same currency units as the real gdp of the other country, so a common exchange rate must be used. Say the exchange rate is /1 and uk gdp per capita is 25,000 so it is equal to ,000. What buys you in the us might buy you far more in a less developed economy. For example in china might buy you as much as 2 times what buys you in the. United states eg shoes cost in us but only 350 yuan in china.
