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 the relative economic prosperity of Country X and Country Y, we need a measure that accounts for both the size of the economy and the number of people.
Option a: Inflation. While inflation affects price levels, it does not directly compare the overall standard of living or total economic output across countries. It’s not a measure of relative prosperity.
Option b: Real GDP per capita. This option combines real GDP (adjusted for inflation) with population size, giving an average economic output per person. It enables a fairer comparison of living standards across countries with different population scales, which is precisely what we want when judging relative prosperity.
Option c: Real GDP. Real GDP measures the total value of goods and services produced in an economy, adjusted for inflation, but it does not account for population size. A country with a larger population could have higher real GDP but not higher average prosperity per person.
Option d: Nominal GDP. Nominal GDP uses current prices and not adjusted for inflation, and like real GDP, it does not reflect population size. It can mislead when comparing countries with different price levels or inflation histories, and it doesn’t provide per-capita insight.
Thus, after evaluating each option, the measure that best facilitates comparing prosperity per person across countries is Real GDP per capita, as it standardizes economic output by population and removes price level distortions.

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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