Country X has a population of 100 million and a GDP of $500 billion in 2017. Country Y has a population of 40 million and a GDP of $400 billion in 2017. Which economic measure would be most appropriate to make a comparison of the relative economic prosperity of each country?

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BlackTom AI · Accepted Answer

We begin by restating the scenario to set the context: Country X has a population of 100 million and a GDP of $500 billion in 2017, while Country Y has a population of 40 million and a GDP of $400 billion in 2017. The question asks which economic measure would be most appropriate to compare the relative economic prosperity of each country.

Option a: Real GDP per capita. This measure divides real GDP by the population, adjusting for inflation and allowing a direct comparison of average economic output per person across countries. It accounts for both the size of the economy and the number of people, and it controls for price level differences through real values. Therefore, it is well-suited for assessing relative prosperity.

Option b: Real GDP. This is the total output of an economy adjusted for inflation, but it does not account for population size. Two countries could have similar real GDPs but very different population sizes, which would mislead about average living standards. Thus, while useful for assessing overall economic volume, it is less adequate for comparing prosperity per person.

Option c: Nominal GDP. This is GDP measured using current prices, without adjusting for inflation. It is highly sensitive to price level differences and does not reflect true purchasing power or income standards across countries with different price levels or inflation histories. Consequently, it’s not ideal for cross-country prosperity comparisons.

Option d: Inflation. Inflation measures the rate at which prices rise over time, not the level of economic output or living standards. While important for price stability analysis, it does not provide a direct basis for comparing overall prosperity between countries at a given time.

In evaluating these options, the goal is to compare living standards and overall welfare across countries in a way that is fair to both the size of the economy and the number of people. Real GDP per capita combines inflation-adjusted output with population normalization, addressing both quantity and per-person economic well-being, whereas the other measures fail to capture one or both of these essential factors.

Therefore, option a stands out as the most appropriate measure for comparing relative economic prosperity between Country X and Country Y, given the need to standardize for population differences and inflation effects, though the assessment above explains why the other options are less suitable for this specific purpose.

Country X has a population of 100 million and a GDP of $500 billion in 2017. Country Y has a population of 40 million and a GDP of $400 billion in 2017. Which economic measure would be most appropriate to make a comparison of the relative economic prosperity of each country?

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