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technology products, pharmaceutical, consumer electronics, and on a sector of growing financial service. 1st advantage China has a more developed than in many developing countries and the balance of trade, China's much faster rate than India has been since the 1950s, manufacturing growth. Due to this Real GDP per capita does not tell the exact details of the average income of the country per citizen in a year. Please i need some help », Can I please get some hand here? GDP also doesn't show how wealth is spread, as there could be a big rich-poor gap in a country. Advantages of GDP are many, with some of the more important ones being a way to define the business cycle, the ability to understand shifts in a country’s economy, and a measurement for competitiveness in a global environment. Therefore, GDP may overestimate living standards in a country. GDP doesn't account for quality of goods: Consumers may buy cheap, low-quality, short-lived products repeatedly instead of buying more expensive, longer-lasting goods. 9 Advantages of Globalization. Advantages and Disadvantages of Globalization. Is national happiness going to be a better way to measure economies than GDP, in 2020? |~ », Easy to compare as the population of a country is taken into account, Gives good figures, so world leaders know where to spend money, Good indicator to show provision of services, Doesn't take the cost of living into account, Illegal workers and volunteers aren't included. While this approach has advantages, there are also many criticisms on GDP as an indicator of standard of living or welfare. Often used to rank countries to establish a fair system of aid payments. Per-capita GDP is a reasonable measure of a country's standard of living. Discussions above show that GNP per capita is an inadequate measure of economic development and social welfare. Limitations and drawbacks include the following: One of the disadvantages if the real GDP per capita is that it does not take into consideration the cost of living of the person of their country into account while calculating it. Change in per capita gdp is a pure measure of productivity because it controls for population size. Real GDP per capita calculates an average figure, due to this it is not possible to get the output from it regarding the distribution of the income among the people of the country i.e., it does not tell that how the wealth is spread in the country. Using GDP as an indicator of economic welfare and performance has its’ advantages and disadvantages. It is also a fairly decent indicator of average standard of living in a country. So the real GDP per capita of the country is $ 40,000 for the year 2018. Disadvantages. Although the GDP per capita of a country may be very high, it may be the case that 10 percent of the country earn millions of times more than the other 90 percent of the country's inhabitants, who earn extremely low … There are several "disadvantages" if that's what you want to call them. GDP and GDP Per Capita. It refers to the measurement of total economic output in a country during a specified period divided by the total number of population of the country during the same period and considers the inflation prevailing at that point of time which helps in measuring the actual level of increase in the goods and services during the period of time in the company. There are several different advantages which are as follows: Limitations and drawbacks include the following: Real GDP per Capita helps in measuring almost everything that the country creates in the entire year and is used for comparison of the living standard amongst the countries over the time which reflects the feelings of all the citizens about how prosperous is their country but at the same time it does not take into consideration cost of living of the person of their country, does not tell that how the wealth is spread in the country, does not take into consideration the details of earnings of the illegal workers in the country as well as the people who are working voluntarily in the country and does not give any indication on the spending power of the people of the country. Here real GDP can't measure Standard of living. This has been a guide to what is Real GDP Per Capita and its definition. Sweden ISN'T Socialist! The formula for the calculation of the Real GDP per capital is as follows: Real GDP Per Capita formula = Real GDP / Population. This value is one of the useful measures for the leaders of the world because it helps the leaders in deciding where the money needs to be spent to use it in the best possible manner. Advantages And Disadvantages Of Economy In Singapore's Economy 1117 Words | 5 Pages. Over time, consumers could spend more replacing cheap goods than they would have if they had bought higher-quality goods in the first place, and GDP would grow as a result of waste and inefficiency. GDP per capita is often used as an indicator of welfare in an economy. GDP is a well-respected, clear assessment of the wealth of a nation’s economy. As a result of globalization, we all enjoy many advantages. The major advantages to using GDP per capita as an indicator of standard of living are that it is measured frequently, widely and consistently. Although GDP is easy to compare, it shows which countries are rich and poor, not which countries need specific funding from the UN. When the GDP is adjusted for inflation, it is called nominal GDP. It is hard to determine if consumers are receiving quality goods that do not cause them more money to replace a low-good with a higher-quality good. GNI figures provide a snap-shot indication of the huge difference between the more developed and less developed countries. Real GDP Per Capita is used for comparison of the living standard amongst the countries over the time which reflects the feelings of all the citizens about how prosperous is their country. CFA Institute Does Not Endorse, Promote, Or Warrant The Accuracy Or Quality Of WallStreetMojo. However, proper analysis of the entire process has delineated certain limitations of GDP per Capita in Measuring Growth. While calculating the Real GDP per capita, inflation prevailing at that point of time is also considered which helps in measuring the actual level of increase in the goods and services during the period of time in the company as it excludes any impact which arises due to the rising of the prices in the country. Disadvantages include government spending as a positive portion of GDP along with natural disasters and the fact that it does not take into account work done outside of a monetary transaction (housewife cleaning the house and making dinner for example). GDP per capita is measured when GDP is divided by the number of people in the country. Show more. A rise in th GDP per capita generally means economic growth and a rise in standard of living for many of the people in the country. GDP per capita is a measure that results from GDP divided by the size of the nation's overall population. Answer and Explanation: Become a Study.com member to unlock this answer! 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