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

Balance of payment, what causes a shift in the balance of payment?

what causes a shift in the balance of payment?

True or False, 1) Consumption is positively related to stock market wealth ...

1) Consumption is positively related to stock market wealth but negatively related to taxes and tax rates.

Who was the labour chancellor gordon brown, Who was the Labour Chancellor G...

Who was the Labour Chancellor Gordon Brown In the period between 1997 and 2006 the Labour Chancellor Gordon Brown was committed to self-imposed Sustainable Investment Rule that

Components in the costs of health care services, What are the key component...

What are the key components in the costs of health care services?

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.

Describe endogenous growth theory, Q. Describe Endogenous growth theory? ...

Q. Describe Endogenous growth theory? Endogenous growth theory or new growth theory was developed in the 1980s by Paul Romer and others. In neo-classical model, technological p

For high school graduates increase the wage, Arrow up or down: An increase ...

Arrow up or down: An increase in the wage for high school graduates __________ the opportunity cost of college. A) arrow up B) Arrow down

Exante real interest rate, The exante real interest rate is based on _____ ...

The exante real interest rate is based on _____ inflation, while the ex post real interest rate is based on _____ inflation. A) expected; actual B) core; actual C) actual;

Good to peanut butter, Bread is a related good to peanut butter: show on th...

Bread is a related good to peanut butter: show on the graph of the market for peanut butter, the impact on the price and quantity from an increase in the price of bread.

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