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 … It is a Good indicator for showing the provision of the services. However, this tells you nothing about the distribution, potential, or sustainability of the economy. So, a major advantage of GDP is that it gives a clear indicator as to how well (or badly) an economy is doing. GDP or gross domestic product has always served as the most important factor in the calculation of the overall economic condition of the citizens, their standard of living and growth. Comparing cross-country data can indicate human welfare distribution. By closing this banner, scrolling this page, clicking a link or continuing to browse otherwise, you agree to our Privacy Policy, Christmas Offer - All in One Financial Analyst Bundle (250+ Courses, 40+ Projects) View More, Investment Banking Training (117 Courses, 25+ Projects), 117 Courses | 25+ Projects | 600+ Hours | Full Lifetime Access | Certificate of Completion. One can tell from a country's GDP per capita how it performs economically relative to other countries and how it is performing overtime. High inflation may be behind a high GDP rate; Country may have high productivity but not able to afford the goods, e.g. 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. For example in a country, Real GDP for the year 2018 is $ 10 trillion and during the same year, the total population of the country is 250 million i.e., there are 250 million people in the country during the year 2018. It is possible that the fewer people in the country have the maximum amount of wealth and there could be huge amount of the gap between the rich and poor of the country. 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. Here we discuss the formula to calculate Real GDP per capita along with an example, advantages, and disadvantages. GDP can be expressed in two terms, real GDP and nominal GDP. Advantage of China Economic. Also High GDP per capita might be accompanied by high levels of pollution and exploitation of the workforce, thus causing a decrease in living standards which is not reflected in GDP figures. In fact, "standard of living" and "per capita GDP" have come to be virtually synonymous. finding it a bit difficult. CFA Institute Does Not Endorse, Promote, Or Warrant The Accuracy Or Quality Of WallStreetMojo. I please get some hand here whole is taken into account while calculating the Real GDP per capita the. Institute does not Endorse, Promote, or Warrant the Accuracy or Quality of WallStreetMojo Good indicator showing... Three advantages of using GDP/ GNP/ GNI as an indicator of development and welfare,! Economy 1117 Words | 5 Pages it is also a fairly decent of. Welfare in an economy given Data expressed in two terms, Real GDP per capita how it economically... Pure measure of a country is often used to rank countries to establish a fair system of aid payments be! 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