Economic growth & income
- most popular method for comparing living standards between different economies is income
- it measures the ability of a nation’s citizens to satisfy their material wants
- limitations in comparing the size of economies is the exchange rate used.
- By using the USD, we can make inaccurate comparisons about the living standards of developing countries
- Economists make adjustments using Purchasing Power Parity (PPP) before comparing GNI levels between countries
- Purchasing power parity (PPP) is :: a theory that states that exchange rates should adjust to equalise the price of identical goods and services in different economies throughout the world.
Economic development
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Economic development :: broad measure of population wellbeing supported by economic indicators (health, education, environment quality, living standards)
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GINI coefficient : quantitive measure of income inequality (higher = higher inequality)