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

The monetary system.., bank A has a leverage ratio of 10 while bank B has a...

bank A has a leverage ratio of 10 while bank B has a leverage ratio of 20 similar losses on bank loans at the two banks cause the value of their assets to fall by 7 percent. Which

Steady state in solow model, conditions for steady state in solow model.in ...

conditions for steady state in solow model.in what respects is golden rule different from steady state?

OPEN ECONOMY, EXPLAIN THE 5 SECTOR MODEL (OPEN ECONOMY) IN INCOME DETERMINA...

EXPLAIN THE 5 SECTOR MODEL (OPEN ECONOMY) IN INCOME DETERMINATION

Effect on unemployment, From the lower left graph of Fig. it can be seen th...

From the lower left graph of Fig. it can be seen that there is a time lag associated with an oil price shock and its subsequent effect on unemployment. The results show that for th

Average cost curve, A firm with a U-shaped average cost curve finds that it...

A firm with a U-shaped average cost curve finds that its revenues exceed its costs when it sets price equal to marginal cost. On which part of its average cost curve is the firm op

FEDERAL BUDGET, HOW TO GET THE REVENUES AND EXPENDITURES AS A PERCENT OF GD...

HOW TO GET THE REVENUES AND EXPENDITURES AS A PERCENT OF GDP?

Trade barries , #discuss the arguments for and against the use of trade bar...

#discuss the arguments for and against the use of trade barries in anay counrty

Elucidate own small building company, You operate your own small building c...

You operate your own small building company and have decided to bid on a government contract to build a pedestrian walkway in a national park during the coming winter. The walkway

Equilibrium price and quantity of coffee, The quantity of coffee demanded, ...

The quantity of coffee demanded, QD, depends on the price of coffee, Pc, and the price of tea, PT. The quantity of coffee supplied, QS, depends on the price of coffee, Pc, and the

Nations'' levels of per capita, In general, economists have found that as n...

In general, economists have found that as nations' levels of per capita real Gross Domestic Product (GDP) increase, A. the rate of population growth declines. B. the rate of

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