Uses of national income data Flashcards
How is national income data used to assess changes in living standards over time?
National income data, especially GDP per capita, helps assess changes in living standards by indicating the average income or output per person. Increases suggest improved living standards if they outpace inflation and population growth.
What is one key limitation of using national income data to assess living standards over time?
National income data doesn’t account for non-economic factors such as environmental quality, income inequality, and leisure time, all of which affect overall well-being and living standards.
How is national income data used to compare living standards between countries?
National income data, often in terms of GDP per capita, is used to compare average income levels across countries, providing an approximate measure of relative living standards.
What is a limitation of comparing national income data between countries?
National income comparisons can be misleading due to differences in cost of living, income distribution, and social services, which are not reflected in GDP per capita.
What is purchasing power parity (PPP), and why is it important in comparing living standards internationally?
PPP adjusts national income data for differences in price levels between countries, allowing for a more accurate comparison of real purchasing power and living standards.
What does PPP stand for
purchasing power parity
How does PPP differ from using exchange rates for international comparisons of national income?
PPP considers the relative cost of goods and services in each country, while exchange rates reflect currency values that can fluctuate due to market factors, potentially distorting comparisons of living standards.
What is PPP
a measure of the relative value of currencies that compares the prices of purchasing a fixed basket of goods and services in different countries.
