Final answer:
The World Bank uses the Gross National Income (GNI) to divide countries into four categories of economic development: low-income, lower-middle-income, upper-middle-income, and high-income countries. The GNI measures a nation's wealth by including all income generated by its residents and businesses.
Step-by-step explanation:
The Gross National Income (GNI) is used by the World Bank to categorize countries into four levels of economic development based on their income. These categories are:
- Low-income countries
- Lower-middle-income countries
- Upper-middle-income countries
- High-income countries
GNI considers the total income earned by a nation's residents and businesses, including any income received from abroad. It is a broad measure that reflects the economic activity of a nation and helps assess its economic status. Because the value of a currency can vary widely, the World Bank uses GNI figures converted to U.S. dollars using an exchange rate averaged over a three-year period to mitigate the effects of currency fluctuations.
This way, the GNI calculation offers a more accurate representation of a country's wealth and can be used to compare the economic performance of different countries.