Problems with using GDP per capita figures

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  • Problems in using GDP per capita figures
    • The figures take no account of income distribution
      • Lorenz curve/ Gini coefficient
    • GDP figures underestimate the national income because of the hidden economy
      • e.g. black markets, informal sector and any unrecorded activity. Difference between Y and expenditure
    • GDP per capita needs to be adjusted to real GDP per capita to remove changes in the price level
    • Prices must be converted into a common currency if the price comparison between nations are to be made.
      • The choice of the Xr at the time can crucially effect the outcome.
      • Most figures are calculated under purchasing power parity (ppp)
        • The Big Mac inderx
    • GDP figures do not count the none traded output/ non-monetized output.
      • DIY, child-care ironing, cooking, cleaning.
      • In developing countries subsistence farming is not counted
    • International comparisons can be very difficult
      • Differences in collecting data
      • Xr and calculation of PPP
      • size of non-moneterised economy
      • differences in inequalities
      • Weather
      • Culture and religions
      • state of development
      • Conflict and wars


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