ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -6 October 2016-Although GDP per capita is often used as a broad measure of average living standards, high levels of GDP per capita do not necessarily mean high levels of household disposable income, a key measure of average material well-being of people.

Detailed explanation-2: -Real GDP per capita removes the effects of inflation or price increases. Real GDP is a better measure of the standard of living than nominal GDP. A country that produces a lot will be able to pay higher wages. That means its residents can afford to buy more of its plentiful production.

Detailed explanation-3: -In other words, when an economy generates more value per person per year, that typically translates into more money for those working in that economy. Most often, the indicator economists use to determine the prosperity, or well-being, of a country or region is GDP per capita.

Detailed explanation-4: -Since per capita income uses the overall income of a population and divides it by the total number of people, it doesn’t always provide an accurate representation of the standard of living. In other words, the data can be skewed, whereby it doesn’t account for income inequality.