2.11 - Comparing national income between countries

Question 1

Issues with comparing national income between countries

Answer 1

. Countries may have different accounting conventions to calculate national income

. Quality of goods and services differs. E.g. countries differ in speed of speed and coverage of broadband yet national statistics only record how much is spent

. Countries spend different proportions of their GDP on defence and related expenditures but they expenditures do not necessarily contribute the standard of living

. Size of unrecorded parts of the informal economy differs between countries. Existence of the informal economy can lead to unemployment being overstated, which can lead to governments overspending in the welfare benefit sector, hindering economic growth. Additionally, it means less tax revenue

. Quality of national income data gathered varies enormously. For e,g, a poor country like Tanzania spends far less on gathering data than a rich country like the UK