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

Microsoft and standard oil, In what major way do the Microsoft and Standard...

In what major way do the Microsoft and Standard Oil cases differ?

Passive deficit is the portion, A passive deficit is the portion of the def...

A passive deficit is the portion of the deficit that exists when: A. inflation is not fully anticipated. B. inflation is fully anticipated. C. the economy is at potential income. D

#title., it has been argued that economic development of developing countri...

it has been argued that economic development of developing countries has been held back by a persistent fall in the terms of trade of developing countries over the long run

Economic growth cyclic fluctuations, Economic Growth Cyclic Fluctuations ...

Economic Growth Cyclic Fluctuations At this stage, it is useful for us to understand the difference between economic growth and cyclical fluctuations. Economic Growth Econo

Find the nash equilibria, Two people are engaged in a joint project. If eac...

Two people are engaged in a joint project. If each person i puts in the effort x i , the outcome of the project is worth f ( x 1, x 2). Each person's effort level x i is a

Determination of C - Im and NT, Once Y is determined, almost all of the oth...

Once Y is determined, almost all of the other variables are determined since they are either exogenous or they depend on Y. From Y we can determine C by consumption function, I m

Perfect competition and monoploy, 1. # of sellers, # of buyers 2. entry and...

1. # of sellers, # of buyers 2. entry and exit conditions 3. product characteristics 4. short run P&Q determinations and the resulting 3 possibilities for excess profit (graphs ar

What is the meaning of deindustrialisation, What is the meaning of Deindust...

What is the meaning of Deindustrialisation Deindustrialisation or structural decline of many manufacturing industries along with activities like coal mining is associated with

The government - rest of the world and the financial markets, The Governmen...

The Government, Rest of the World and the financial markets total expenditure of government can be divided into two parts: transfers to private sector and consumption.

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