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Download Limitations of GDP and Alternative Indexes
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Limitations of GDP and Alternative Indexes Ä Ä Ä Economic growth rate is measured by percentage changes in real GDP. Per capita GDP measures GDP per individual resident. Alternative indexes consider those factors excluded from GDP to provide a more accurate measure of a country’s standard of living. Recall that real GDP equals nominal GDP divided by the GDP deflator, or the average change in the price level. Notice that the chart to the left shows Mexico’s having a more rapid growth rate than the US. This is not an accurate indicator of the standards of living between the two countries because Mexico starts with a smaller base of real GDP. Per capita GDP is calculated by dividing a country’s real GDP by its population. Similar to the calculation of real GDP, per capita GDP may not be an accurate measure of the standard of living. Differing relative bases yield differing relative per capita GDPs. www.compasslearning.com Copyright ã 2006, Thinkwell Corp. All Rights Reserved. 1180.doc –rev 11/07/2006
