Which country is assumed to have higher gdp per capita

Download 17.34 Kb.

Page	1/2
Date	11.04.2021
Size	17.34 Kb.
	#56311

1 2

Tutorial 2 DE

Q1 a: Which country is assumed to have higher GDP per capita
E.g 1: Using the table in order to calculate GDP per capita we should divide Gross saving as % of GDP and Population (millions)

Country A: (20%/20.8) = 0.96%
Country B: (25%/22.7) = 1.1%
based on the calculation above country B has higher GDP per capita
Feedback: calculation is not needed because the real or nominal GDP of the countries are not given. Therefore, it is inaccurate to use the above formula. It is not wrong but the value given may not be correct if compared to GDP per capita using the real or nominal value.
E.g 2: Country B has the higher GDP per capita compared to Country A. This is because the gross savings for Country B (25.0%) is higher than Country A (20.0%). We can see that people can save more if the income they receive is higher.
Feedback: What is the link between gross saving of the country and receiving higher income? The explanation needs to be clear and logical.
E.g. 3: Country B has higher savings. High savings lead to less consumption which results in larger amount of capital investment and results in higher econ growth
Feedback: There is a need to rephrase the statement “high savings lead to less consumption”. In this case, the argument should be based on the data given. No need to mention about consumption here. Instead, explanation should emphasize on high savings equate to better level of investment because savings is one way to financed investment.

Model answer:

ABDUL HAFIZ SHAM BIN SHIZAL FISHAM .

1. The data that I can use to infer which country has a higher GDP per capita are gross savings, inflation rate and index of economic freedom. Country A has a higher percentage of gross savings over GDP than Country B, which means that Country A is consuming more than Country B. More consumption leads to more stimulated economic activity leads to higher GDP. For inflation rate, it can be observed that inflation is much higher in Country A than in Country B. Usually, higher GDP leads to higher inflation as prices are raised to keep up with increased aggregate demand. In general, countries with a higher index of Economic Freedom have higher GDP. However, country A has a smaller population than country B and since we are measuring per capita, I think they cancel each other out. Thus, I think that Country A has the higher GDP per capita.

2. Generally, a higher GDP per capita would mean that the country's citizens would have more disposable income to spend on food, shelter, healthcare, insurance and other needs, therefore a higher standard of living. But since the life expectancy of Country A does not reflect that, that is a person is expected to only live to 55 years old, it could mean that much of the wealth is being held by an elite few. Even more telling is the fact that country A's literacy rate of 70% is lower than country B's literacy rate of 99%, which implies that education is concentrated among the elites and most middle-class members. Besides that, country A's Index of Economics Freedom is quite lower than country B's. It means that the economy is restricted and closed rather than free and open.

Thus, I think that country A has a lower standard of living even though it has higher GDP per capita because it might be a corrupt democratic but still developing country like Brazil whereas country B is an advanced developed first world country with a much higher standard of living even though it has lower GDP per capita like Denmark and Sweden.

Download 17.34 Kb.

Share with your friends:

1 2