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Chapter 19: Q. 18 (page 470)

What are the two main difficulties that arise in

comparing different countries' GDP?

Short Answer

Expert verified

Two main issues are to convert different currencies into a common currency and to divide GDP by population to compare the cost of living across countries.

Step by step solution

01

Step 1. Definition

The Gross Domestic Product (GDP) is a measure that evaluates a country's economic prosperity and standard of living.

02

Step 2. First issue

Various currencies are used in various nations. Every country's GDP is calculated in the currency of that country. As a result, to compare the GDP of different countries, multiple currencies must be converted into a single currency.

03

Step 3. Second issue

The population of different countries varies. For example, the United States has a larger population than Mexico and Canada. As a result, in order to compare the cost of living between countries, GDP must be divided by population.

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Most popular questions from this chapter

The “prime” interest rate is the rate that banks charge their best customers. Based on the nominal interest rates and inflation rates in Table 19.10, in which of the years would it have been best to be a lender? Based on the nominal interest rates and inflation rates in Table 19.10, in which of the years given would it have been best to be a borrower?

According to Table 19.7, how often have recessions occurred since the end of World War II (1945)?

A mortgage loan is a loan that a person makes to purchase a house. Table 19.11 provides a list of the mortgage interest rate for several different years and the rate of inflation for each of those years. In which years would it have been better to be a person borrowing money from a bank to buy a home? In which years would it have been better to be a bank lending money?

In 1980, Denmark had a GDP of \(70 billion (measured in U.S. dollars) and a population of 5.1 million. In 2000, Denmark had a GDP of \)160 billion (measured in U.S. dollars) and a population of 5.3 million. By what percentage did Denmark’s GDP per capita rise between 1980 and 2000?

Country A has export sales of \(20billion, government purchases of \)1,000billion, business investment is \(50billion, imports are \)40billion, and consumption spending is $2,000billion. What is the dollar value of GDP?
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