Question

In 1 or 2 sentences, mention (1) one disadvantage of using real GDP per capita as a standard of living measurement and (2) one factor that is included in an alternative measurement for the quality of life, but not found in the GDP per capita.

Answer 1

Per capita GDP is a way of measuring the average income of a country. Basically, it is the total income earned from the entire production of goods and services of a nation divided by the number of inhabitants. However, this is not a good measure to assess the population's quality of life, as it does not capture income inequalities. A country may have high GDP per capita but be very unequal if there are very rich people and a poor majority. Alternatively, a good indicator for assessing quality of life is the Human Development Index. This index takes into account the access to basic health, education, life expectancy and income of the population as a whole, being considered more efficient by economists when it comes to analyzing the standard of living compared to GDP per capita.

Answer 2

The disadvantage of using the real GDP per capita as standard of living is that it does not account other factors that might affect the current status of the economy. GDP is a measure of national spending capability that does not distinguish the transactions being made internally.