Welcome to another edition of Macro Mondays! Today I want to shift the focus globally and talk about determining how much wealth exists relative to the number of people in individual countries. This is meant to supplement our article a couple weeks ago on which countries possess the strongest economies: today we will talk about part of that overall measurement, which is GDP per capita.
To learn more about GDP per capita and other investing terms, please check out Investopedia's website by CLICKING HERE.
What does 'Per Capita' mean?
Per capita is a Latin term that translates into "by head," basically meaning "average per person." Per capita can take the place of saying "per person" in any number of statistical observances. In most cases, the phrase is used in relation to economic data or reporting, but it can also be used in almost any other occurrence of population description.
What is 'Per Capita GDP '?
Per capita GDP is a measure of the total output of a country that takes gross domestic product (GDP) and divides it by the number of people in the country. The per capita GDP is especially useful when comparing one country to another, because it shows the relative performance of the countries. A rise in per capita GDP signals growth in the economy and tends to reflect an increase in productivity.
So what does 'Per Capita GDP ' really measure?
GDP is one of the primary indicators of a country's economic performance. It is calculated by either adding up the annual incomes of all working-age citizens or by totaling the value of all final goods and services produced in the country during the year. Per capita GDP is sometimes used as an indicator of standard of living, with higher per capita GDP equating to a higher standard of living.
How does it measure a country's productivity?
Per capita GDP can also be used to measure the productivity of a country's workforce, as it measures the total output of goods and services per each member of the workforce in a given nation. However, many economists state that a better measure of worker productivity may be GDP per hours worked. Per capita GDP does not take into account the influence of technology over a worker's output. If two countries each have a workforce that possesses an equal measure of per capita GDP, it appears that both nations hold an equal standard of living. However, a further examination of GDP per hours worked offers a different view of worker efficiency. The country with the lower GDP per hours worked actually enjoys more leisure time.
Singapore and Norway, whose output per worker was identical relative to the United States in 2013, hold distinct differences in per capita GDP per hours worked. The 1.41 measure applied to Singapore indicates that workers in that nation put in more hours than their Norwegian counterparts, whose metric stood at 0.83 in 2013.
Are there some disparities with GDP Per Capita?
Yes. The vast differences in per capita GDP are exemplified by comparisons between developed and developing economies. At $132,099, Qatar had the highest 2015 worker output in the world when adjusted for purchasing power parity (PPP), a measure that pegs each nation's currency to the U.S. dollar for comparative purposes. By contrast, Ethiopia, which sits toward the bottom of the global scale, held a per capita GDP of $687 in 2015. The marked disparity experiences a reversion when GDP per capita growth is examined. Ethiopia, in which crude exploration activity ramped up in 2014, experienced the highest global growth in output per worker in 2015, at 8.5%, whereas worker productivity in the oil-rich nation of Qatar experienced a contraction of 4.6%.
Greetings, GradMoney Readers!
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