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Chapter 30: Problem 3

Which of the following is true when making GDP per capita comparisons among nations? a. The GDP per capita is subject to greater measurement errors for LDCs compared to IACs. b. The GDP per capita does not measure income distribution. c. The GDP per capita is subject to fluctuations from changes in exchange rates. d. All of the above are true.

Short Answer

Expert verified
d. All of the above are true.

Step by step solution

01

Option A: Measurement Errors

GDP (Gross Domestic Product) per capita is the total value of goods and services produced by a country divided by the population. LDCs (Less Developed Countries) typically have less accurate data collection methods, which can lead to greater measurement errors in their GDP per capita calculations compared to IACs (Industrialized Advanced Countries). Therefore, option A is true.
02

Option B: Income Distribution

GDP per capita measures the average income per person in a country, but it does not measure income distribution (i.e., how income is distributed among the population). This means that a country with a high GDP per capita might still have significant income inequality. Therefore, option B is true.
03

Option C: Exchange Rate Fluctuations

When comparing GDP per capita across different countries, the values are often converted to a common currency, such as US dollars. This conversion involves using exchange rates, which can fluctuate over time. Changes in exchange rates can affect GDP per capita comparisons, making some countries appear wealthier or poorer than they might be otherwise. Therefore, option C is true. As all three options are true, the correct answer is:
04

Correct Answer

d. All of the above are true.

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Most popular questions from this chapter

In order for Ethiopia to increase its future economic growth, it must choose a point that is a. below its production possibilities curve. b. further along on its production possibilities curve toward the capital goods axis. c. further along on its production possibilities curve toward the consumption goods axis. d. further along on its production possibilities curve away from the population axis. e. above its production possibilities curve.

An LDC is defined as a country a. without large stocks of advanced capital. b. without well-educated labor. c. with low GDP per capita. d. that is described by all of the above.

Economic growth and development in LDCs are low because many of them lack a. capital investment. b. technological progress. c. a favorable political environment. d. all of the above. e. none of the above.

Which of the following statements is true? a. An LDC is a country with a low GDP per capita, low levels of capital, and uneducated workers. b. The vicious circle of poverty exists because GDP must rise before people can save and invest. c. LDCs are characterized by rapid population growth and low levels of investment in human capital. d. All of the above are true.

Which of the following groups makes long-term low-interest loans to less- developed countries \((\mathrm{LDCs}) ?\) a. Agency for International Development (AID) b. New International Economic Order (NIEO) c. International Monetary Fund (IMF) d. World Bank
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