Purchasing power, Macroeconomics

Assignment Help:

One problem in using exchange rate when comparing GDP per capital between countries is that is fluctuates a lot. A way of avoiding dependence on exchange rate is to use purchasing power. 

GDP is a flow!

Lastly, note that GDP is a flow variable, not a stock variable. By a flow variable we mean a variable which is measured in something per unit of time. If you fill a bath tub you may fill it at 40 liters per minute - a flow - whereas the tub itself may comprise 200 liters - a stock. Similarly, income is flow (you may make 9 euro per hour) whereas the amount of money you have in your bank account is a stock (you would never claim that you have 2400 euro 'per month' in your account - you have 2400 euro period).

GDP, being a flow, isn't a measure of the total wealth of a country however a measure of the 'income' of the country during a particular period of time. Sure if GDP is high, it is very likely that total wealth of the country is increasing over time (some wealth is lost to depreciation). Consequently there is often a connection between what we perceive as a 'rich' country and a high GDP per capita.


Related Discussions:- Purchasing power

Investments has a larger future value, Which of the following investments h...

Which of the following investments has a larger future value: Investment A an $1,000 investment earning 5% per year for 6 years? Or Investment B a %500 investment earning 10% per y

Rate of inflation, 2. Given the following information: Consumers are very o...

2. Given the following information: Consumers are very optimistic about the future. The price of oil has just doubled. The money supply is growing at a 6% rate. The government has

Protectionism and free trade, why is international trade important for sout...

why is international trade important for south Africa

Draw the strategic form game, Consider a two-player game where player A cho...

Consider a two-player game where player A chooses "Up," or "Down" and player B chooses "Left," "Center," or "Right". Their player is as follows: When player A chooses "Up" and play

State about the central bank and monetary policy, Central bank and monetary...

Central bank and monetary policy By monetary policy we mean the policy directed at controlling the money supply and the interest rates. In most countries, the central bank is r

Seafood restaurant in a beach resort town, A seafood restaurant in a beach ...

A seafood restaurant in a beach resort town has a fixed (unavoidable) cost of $1,000 per month and variable (avoidable) costs of another $1,000 per month. Its total revenues over t

Describe the concept of economies of scale, Question: Using diagrams wh...

Question: Using diagrams where appropriate, describe the concepts of scarcity, choice and opportunity cost. Distinguish between negative and positive externalities, explain

Overnight interest rates targets and money supply, Q. Overnight interest ra...

Q. Overnight interest rates targets and money supply? There are many ways to explain the significant connection between overnight interest rate target and money supply. We will

Liberalisation and changing sources of fdi, Liberalisation and Changing Sou...

Liberalisation and Changing Sources of FDI: European countries  had been major sources of FDI inflows  to India until 1990. However, their relative importance declined in the

National income, difference between gdp at market price and nnp at factor c...

difference between gdp at market price and nnp at factor cost

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd