Question

Why is GDP per capita used as an estimate of the average standard of living in a country?

Answer 1

Real GDP per capita removes the effects of inflation or price increases. Real GDP is a better measure of the standard of living than nominal GDP. A country that produces a lot will be able to pay higher wages. That means its residents can afford to buy more of its plentiful production.

Answer 2

The GDP per capita is used as an estimate of the average standard of living in a country because it removes the effects of inflation or price increases.

What is Gross domestic product (GDP)?

Gross domestic product is a broad monetary measure of a nation’s overall economic activity.

It is a financial strength of the market value of all the concluding goods and services delivered in a period of time, often periodically.

Hence, the GDP per capita is used as an estimate of the average standard of living in a country because it removes the effects of inflation or price increases.

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