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

INFLATION-UNEEMPLOYMENT TRADE-OFF UNDER ADAPTIVE EEX, Explain how inflation...

Explain how inflation unemployment trade-off is not feasible under adaptive expectation.MEC002

Determine about the gross domestic product growth, Determine about the gros...

Determine about the gross domestic product Growth By (nominal) GDP-growth we mean % change in (nominal) GDP over a particular period of time. Real GDP growth is stated as perce

BUS668, Prepare calculations and a one to two page analysis, following the ...

Prepare calculations and a one to two page analysis, following the APA guidelines, that addresses the following: Assuming that the expectations theory is the correct theory of the

Assignment, derive equations for IS,LM and AD curves.

derive equations for IS,LM and AD curves.

State the appropriate null and alternative hypotheses, Suppose a new produc...

Suppose a new production method will be implemented if a hypothesis test supports the conclusion that the new method reduces the mean operating cost per hour. a. State the appro

Main causes of inflation in an economy, Question 1: Differentiate betwe...

Question 1: Differentiate between income, price and cross elasticities of demand. How will the concept of price elasticity be useful to the owner of a supermarket who wan

Industry''s long-run supply schedule, A perfectly competitive painted neckt...

A perfectly competitive painted necktie industry has a large number of potential entrants. Each firm has an identical cost structure such that long-run average cost is minimized at

Implication of corruption, what are the implications of corruption in econo...

what are the implications of corruption in economy and fiscal policy

Nation in which the volume of goods, Consider a nation in which the volume ...

Consider a nation in which the volume of goods and services is growing by 5 percent per year. If a country's economic size is growing faster than the rest of the world, then

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