Unit One: Overview | Introducing Growth & GDP | Per Capita Income | Distribution of Income | Growth & Policy

Exercise: Compare National Economic Performance as Reflected in Per Capita GDP

GDP alone does not tell the whole story about a nation's economic well-being. One must also ask, how large a share is available to the average individual as income? In other words, GDP must be considered in relation to the size of the population it supports. Two economies with similar total GDP may not deliver comparable standards of living if one nation has a small population and the other has a very large one. To assess this aspect of economic performance, economists look at per capita GDP.

Per capita GDP is simply the value of total GDP divided by the number of people in the country. If total GDP conveys the size of the "whole pie," per capita GDP expresses how big a slice there is for each individual in the country. Per capita GDP does not reflect how wealthy the people really are; it only shows how well off they would be if everybody got an equal share of what the economy produces.

Total GDP vs. Per Capita GDP

The table below lists seven nations (column A) along with the total value of GDP in the year 1999 (column B).

Column D lists the population for each of the seven nations, in millions of people.
Column E reports the per capita value of GDP, calculated as follows:

1. Take the value in Column B and multiply it by 1 billion (or 109)
2. Take the value in Column D and multiply it by 1 million (or 106)
3. Divide i. by ii.

Try this:

1. Rank these nations from richest to poorest (1 is richest, 7 is poorest) on the basis of total GDP (column B). Write these rankings in column C.
  Total GDP in \$PPP-US billions (1999) Rank of Total GDP Population (in millions) Per Capita GDP (in \$PPP-US) Rank of Per Capita GDP (A) (B) (C) (D) (E) (F) Brazil 595.5 170.4 3494.7 Chile 70.5 15.2 4638.2 China 1080.0 1275.1 847.0 Mexico 574.5 98.9 5808.9 Sweden 227.3 8.8 25829.5 Tanzania 9.0 7 35.1 256.4 7 United States 9837.4 1 283.2 34736.6 1
1. Next, rank the nations from richest to poorest on the basis of Per Capita GDP (Column E) (1 is the richest, 7 is the poorest). Write these rankings in Column F.

2. Which nations look "richer" on the basis of per capita GDP than they look on the basis of total GDP? Which nations look "poorer"?

3. Describe how the standing of Sweden changes depending on which measure of economic performance you use.