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

Show the ad curve over time, Q. Show the AD curve over time? With infla...

Q. Show the AD curve over time? With inflation, AD curve will no longer be stable over time. In its place, it will glide upwards or downwards at a rate determined by growth rat

How can we determine fixed exchange rate, How can we determine fixed exchan...

How can we determine fixed exchange rate If a nation has a fixed exchange rate (say against a specific currency), the government or central bank may change this fixed exchange

Aggregate supply (as), Aggregate Supply (AS) We now shift our attentio...

Aggregate Supply (AS) We now shift our attention to the supply side of the macroeconomy. Aggregate supply explains the production and pricing side of the economy and the behav

Example of indirect taxes and subsidies- accounting system, Example of Indi...

Example of Indirect Taxes and Subsidies- ACCOUNTING SYSTEM   We now permit our government to impose what are called indirect taxes. This category includes sales tax, excise tax,

Market labor supply, Suppose that the market labor supply and labor demand ...

Suppose that the market labor supply and labor demand equations are given by Qs = 5W and Qd = 30 - 5W. If a minimum wage is set at $4.00 (W = 4), then how all step by step.

Optimal order size, A major component of the costs of many large firms  is ...

A major component of the costs of many large firms  is the cost associated with ordering and holding inventory. If the yearly demand for the good is  D and the size of each order p

Graph, show on the market for cheese that impact of what happened in the mi...

show on the market for cheese that impact of what happened in the milk market.

Unemployment, critically analyse the ways at which the govement of zimbabwe...

critically analyse the ways at which the govement of zimbabwe has put in place to address unequal employment opportunitiesbetween men andwomen

SARB, #If the reserve bank wants to pursue a contractionary monetary policy...

#If the reserve bank wants to pursue a contractionary monetary policy, the bank should?

TERMS OF TRADE, HOW INCOME TERMS OF TRADE DIFFER WITH COMMODITY TERMS OF TR...

HOW INCOME TERMS OF TRADE DIFFER WITH COMMODITY TERMS OF TRADE"

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