Question

When comparing the GDP of different countries, two issues immediately arise - currency and population differences. How does one account for these while comparing the GDP for different countries

Answer 1

we need to calculate the GDP per capita

Step-by-step explanation:

gross domestic product (GDP) per capita is calculated by dividing nominal GDP by the total population of a country.

Or you can calculate real GDP per capita = real GDP / total population

The World Bank also uses another method for comparing GDP per capita between different countries and it is the purchasing power parity (PPP) which uses the US dollar as the base currency for the world and then calculates the amount of goods that you could purchase in US dollars. This is done to reduce differences in costs between poor and rich countries, e.g. a small house in Switzerland costs hundreds of thousands of US dollars, while a similar small house in Paraguay costs 20-30 thousand US dollars.