Chapter 9: Problem 18

We would like to compare per capita real GDP. Which would be the most valid comparison? (LO6, 7) a) China in 2004 and Thailand in 2004 b) Germany in 2002 and 2004 c) The United States in 1980 and 2004 d) Nigeria in 1960 and the United Kingdom in 1990

Short Answer

Expert verified

The most valid comparison for comparing per capita real GDP is option b) Germany in 2002 and 2004. This is because it involves the same country and two consecutive years, making it a more accurate comparison of the country's economic progress while accounting for changes in price level, output, and population.

Step by step solution

Understand the concept of real GDP per capita

Real GDP per capita is an economic measurement that accounts for changes in the overall price level, population, and output. This means it's a better measure of the standard of living as compared to nominal GDP per capita. We will be looking for the most valid comparison based on this concept.

Evaluate option a

Comparing China in 2004 and Thailand in 2004 can be a valid comparison as they are both in the same year. However, these two countries have different cultures, sizes, and economic structures, which might make the comparison less meaningful and less reliable in terms of understanding the real GDP per capita differences.

Evaluate option b

Comparing Germany in 2002 and 2004 would be a better comparison as it involves the same country and two consecutive years. It accounts for the changes in price level, output, and population for just two years, making it a more accurate comparison of the country's economic progress.

Evaluate option c

Comparing the United States in 1980 and 2004 would involve a long time gap, which makes it difficult to make meaningful comparisons of the real GDP per capita despite being the same country. There are various economic changes and shocks that could have happened in those 24 years that can make this comparison less reliable.

Evaluate option d

Comparing Nigeria in 1960 and the United Kingdom in 1990 includes two different countries and two different years. The cultures, economies, and time periods are substantially different, making this comparison less reliable in understanding the real GDP per capita differences.

Choose the most valid comparison

Considering all the given options, option b) Germany in 2002 and 2004, seems to be the most valid comparison. This is due to the factors like the same country being compared, a shorter time gap, and changes in price level, output, and population for just two years — making it relatively easier and more accurate to compare real GDP per capita between those two years.

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