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

To compare the relative economic prosperity of two countries, we must choose a measure that accounts for both price level changes and population size.
Option a: Nominal GDP. This is the total value of all goods and services at current prices and does not adjust for inflation or population differences. As a result, it can be misleading when comparing countries with different price levels or population sizes.
Option b: Real GDP per capita. This combines two essential adjustments: Real GDP accounts for inflation (price level) so comparisons reflect true changes in output, and per capita means we divide by population, enabling a fair comparison of average living standards across countries.
Option c: Real GDP. While this is inflation-adjusted total output, it ignores how many people share that output. A country could have high real GDP simply due to a large population, not necessarily higher prosperity per person.
Option d: Inflation. This measures price increases over time, not the overall level of economic prosperity or how much goods and services people can consume relative to others. It does not provide a cross-country prosperity comparison.
In summary, Real GDP per capita is the most appropriate measure for comparing relative prosperity because it adjusts for both inflation and population size, yielding a per-person standard of living indicator across nations.

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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