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

Demographic features in development, DEMOGRAPHIC FEATURES IN DEVELOPMENT: ...

DEMOGRAPHIC FEATURES IN DEVELOPMENT: We have learned in the previous unit that human resources play a significant role in generating aggregate flow of goods and services. The

Characteristic of capitalism, Knowing that a neoclassical, capitalist econo...

Knowing that a neoclassical, capitalist economy depends on continuous economic growth (by making its production, distribution, and consumption more efficient), what might a savvy p

Inflation unemployment trade off under adaptive expectations, Explain how i...

Explain how inflation unemployment trade off is not feasible under adaptive expectations?

Describe classical model of macroeconomics, Q. Describe classical model of ...

Q. Describe classical model of macroeconomics? Though we use the term ‘the classical model' as if there were just one classical model, this isn't quite true. For all the models

Explain reversed say''s law, Q. Explain Reversed Say's Law? In the cros...

Q. Explain Reversed Say's Law? In the cross model, supply should instead follow demand. Cross model not only rejects Say's Law, it turns it entirely upside down. In the cross m

Discuss about real verses nominal gross domestic product, Discuss about rea...

Discuss about real verses nominal gross domestic product. Real verses Nominal Gross Domestic Product: Real Gross Domestic Product: the value of the concluding goods and se

Effect of a tax on ice cream, Show the market for cigarettes paying particu...

Show the market for cigarettes paying particular attention to the price elasticity of demand and supply. What would happen to the total expenditure on cigarettes if there was a tax

How we can determine the macroeconomic performance, Macroeconomic performan...

Macroeconomic performance The UK's future macroeconomic performance must be judged on how average living standards improve, inflation is kept under control, economy grows and

Elucidate how the two bonds differ, Consider two bonds. Each has a face val...

Consider two bonds. Each has a face value of $100 and matures in one year. One has a zero coupon payment, and the other pays $10 per year. A. Explain how the two bonds differ

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