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

Circular flow of income, Discuss how income flows in governed economy, frug...

Discuss how income flows in governed economy, frugal economy, spend their economy.

What is the total cost of producing output, What is the total cost of produ...

What is the total cost of producing output? The total cost of producing a specified quantity of output is the total of the fixed cost along with the variable cost of producing

Explain the labor market in the cross model, Q. Explain the labor market in...

Q. Explain the labor market in the cross model? In cross model, both P and W are exogenous andconstant. Hence real wage is constant and it is not essentially equal to the equil

Economic growth cyclic fluctuations, Economic Growth Cyclic Fluctuations ...

Economic Growth Cyclic Fluctuations At this stage, it is useful for us to understand the difference between economic growth and cyclical fluctuations. Economic Growth Econo

Two evils of monopoly, A government purchase real GDP. Are increases in gov...

A government purchase real GDP. Are increases in government purchases associated with increases in real GDP?Describe the important characteristics of perfect competition and monopo

MEC and MEI, MEC and MEI curvs and their role in economics

MEC and MEI curvs and their role in economics

Is-lm approach, with help of is-lm technique explain the process of integra...

with help of is-lm technique explain the process of integration of money market and goods market by way of keynesian approach

Farmer grows wheat and sells, A farmer grows wheat and sells it to a miller...

A farmer grows wheat and sells it to a miller for $1; the miller turns the wheat into flour and sells it to a baker for $3; the baker uses the flour to make bread and sells the bre

Increasing opportunity cost, Using the PPC show what is meant by the law of...

Using the PPC show what is meant by the law of increasing opportunity cost and explain (state) why that law exists. Why is that law important when deciding whether or not to watch

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