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 compare how prosperous countries are relative to their population size, we need a metric that accounts for both economic output and population.
Option a: Inflation. This measures changes in price levels over time, not the overall size of the economy or living standards, so it does not provide a direct basis for cross-country prosperity comparisons.
Option b: Real GDP per capita. This combines real (inflation-adjusted) GDP with population, effectively showing average economic output per person in a way that controls for price changes. It is the standard measure for comparing living standards and prosperity across countries with different population sizes, making it the most appropriate choice here.
Option c: Real GDP. While real GDP controls for prices, it reflects total output without considering how many people share that output. A country with a large population could have a higher real GDP but a lower standard of living per person than a smaller country, so this alone is less informative for comparison of prosperity per capita.
Option d: Nominal GDP. This is GDP at current prices and does not adjust for inflation, and it also ignores population. It can mislead comparisons when price levels differ or over time, and it does not convey average prosperity per person, so it’s not ideal for cross-country prosperity assessment.
In summary, although several measures relate to economic size, only Real GDP per capita directly standardizes output by population and adjusts for inflation, yielding the clearest basis for comparing relative prosperity across 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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