© Copyright Get Revising 2020 all rights reserved. It is a Good indicator for showing the provision of the services. Although GDP is easy to compare, it shows which countries are rich and poor, not which countries need specific funding from the UN. Here we discuss the formula to calculate Real GDP per capita along with an example, advantages, and disadvantages. Sweden ISN'T Socialist! It makes the comparison easy as the country’s population as a whole is taken into account while calculating the Real. Is it time to end our fixation with GDP and growth? GDP is a well-respected, clear assessment of the wealth of a nation’s economy. Let us turn to some illustrations now to show how national income and related aggregates can be calculated from given data. Answer and Explanation: Become a Study.com member to unlock this answer! This has disenchanted economists about its efficacy as a true index of development and welfare. It does not take into consideration cost of living of the person of their country, does not tell that how the wealth is spread in the country, does not take into consideration the details of earnings of the illegal workers in the country as well as the people who are working voluntarily in the country and does not give any indication on the spending power of the people of the country. So, a major advantage of GDP is that it gives a clear indicator as to how well (or badly) an economy is doing. Real GDP reflects the value which has been adjusted for inflation while nominal GDP reflects the value without considering inflation (Abel, Bernanke and McNabb, 1998). finding it a bit difficult. (Source: John Sloman, 2006) Over time, consumers could spend more replacing cheap goods than they would have if they had bought higher-quality goods in the first place, and GDP would grow as a result of waste and inefficiency. Increases inequality: Sometimes spending more on gross national investments (GNI) per capita can hide the widespread inequality within the country. », Economics Assignment . Due to this Real GDP per capita does not tell the exact details of the average income of the country per citizen in a year. GDP per capita is a measure that results from GDP divided by the size of the nation's overall population. GNI figures provide a snap-shot indication of the huge difference between the more developed and less developed countries. The reason behind the importance of environmental indicators. 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. It helps in doing the comparison of the standard of living that is present in the different countries of the world. 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. 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. So wealth distribution cannot be seen with the help of the Real GDP per capita. This value is one of the useful measures for the leaders of the world because it helps the leaders in deciding where the money needs to be spent to use it in the best possible manner. The biggest advantage of GDP per capita being used as an indicator of the standard of living is that GDP per capita is measured widely, consistently, and frequently. Discussions above show that GNP per capita is an inadequate measure of economic development and social welfare. The formula for the calculation of the Real GDP per capital is as follows: Real GDP Per Capita formula = Real GDP / Population. From the Blog. so let us make an in-depth study on the advantages and disadvantages of globalization. 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 … Globalization gives us many advantages and disadvantages. ILLUSTRATION 2.3: Advantages of using GDP/GNP as an indicator: Disadvantages of using GDP/GNP and an indicator: A useful figure for comparing countries. Advantages of GDP are many, with some of the more important ones being a way to define the business cycle, the ability to understand shifts in a country’s economy, and a measurement for competitiveness in a global environment. The difference between GDP and per capita GDP, GPI and GDP. Get Revising is one of the trading names of The Student Room Group Ltd. Register Number: 04666380 (England and Wales), VAT No. Student videos. GDP per capita is often used as an indicator of welfare in an economy. GDP and GDP Per Capita. Disadvantages. Real GDP Per Capita is used for comparison of the living standard amongst the countries over the time which reflects the feelings of all the citizens about how prosperous is their country. Goods, e.g be a better way to measure economies than GDP, GPI GDP... Globalization, we all enjoy many advantages $ 40,000 for the year 2018 Warrant the Accuracy Quality... Gni figures provide a snap-shot indication of the standard of living study on the hand. 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