Purchasing power, Macroeconomics

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.

Posted Date: 8/13/2013 2:07:51 AM | Location : United States







Related Discussions:- Purchasing power, Assignment Help, Ask Question on Purchasing power, Get Answer, Expert's Help, Purchasing power Discussions

Write discussion on Purchasing power
Your posts are moderated
Related Questions
As is the case with the supply and demand function for a single business firm determining the equilibrium price and output for its product, the aggregate supply and aggregate deman


how adverse selection has an impact on financial crisis

Explain the purposes economists disagree and using models of economics. Using Models of Economics: a. Positive economics b. Normative economics A forecast is an easy p

Consider the Tuckman group stage process schema. Identify specific actions a manager can take at each stage of the process to best help a group reach the performing stage. Respond

Unemployment rate (LUNEMP): A key variable to assess the performance of any economy when an economy is growing, the unemployment rate will fall as job creation increases and in

What are forms of price ceiling to lead inefficiency? Price ceilings frequently lead to inefficiency into the forms of: a. Ineffective allocation to consumers b. Wasted r

The annual fixed cost for a light fixture manufacturing company are $38,000, and the variable costs are $40 per unit. If the selling price per unit is p = 485 - 1.395X, what is the

Calculate the marginal cost and marginal analysis for the following table. Calculate the answers and insert them into the shaded cells. Units Produces Cost per Unit Total Cost Ma

List and briefly describe the principal causes of high population growth in developing countries and the major consequences.