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?

Question

BlackTom AI · Accepted Answer

To evaluate relative economic prosperity across countries, we need a measure that accounts for both the size of the economy and the number of people living in it. This helps avoid the distortions that arise when looking at total GDP alone. 
Option a: Nominal GDP. This uses current market prices and does not adjust for population size or price level changes over time. With Country X having a much larger population than Country Y, nominal GDP alone may mislead about living standards, since it mixes output with population scale. 
Option b: Inflation. Inflation measures price changes over time, not the level of prosperity or income per person; it won’t allow a proper cross-country comparison of living standards in a given year. 
Option c: Real GDP. Real GDP adjusts for price changes and reflects the total value of goods and services produced, but it still aggregates across the entire population. It doesn’t directly compare average prosperity per person unless you relate it to population, which is not done here. 
Option d: Real GDP per capita. This statistic divides real GDP by the population, removing scale effects and price level distortions to show the average economic output (and typically standard of living) per person. It provides the most appropriate basis for comparing relative prosperity across countries of different sizes. 
Thus, among the options, Real GDP per capita best answers the question of comparing relative economic prosperity between Country X and Country Y.

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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