Question-   GDP and Standard of Living

Solution-

Country with high economic growth will also have high standard of living”

                The definition of economic growth is an increase in the production of economic goods and services in economy. The increases in capital goods, labour force, technology and human capital can all contribute to economic growth. Other than that, economic growth is commonly measured in terms of the increase in aggregated market value of additional goods and services produced, using estimates such as GDP. Since real GDP measures the quantity of goods and services produced, it is common to use GDP per capita, that is the real GDP divided by population, as a measure of economic welfare or standard of living in a nation.

                As for example in year 2013, China has the second largest GDP of the countries $9.5 trillion compared to the United States $16.8 trillion. China has a much larger population so that in per capita terms, its GDP is less than one fifth that of the United States ($6,958.70 compared to $53, 001). The Chinese people are still quite poor relative to the United States and other developed countries. GDP per capita can give us only a rough idea of the differences in living standards across countries. The high-income nations of the world including the United States, Canada, the Western European countries and Japan is typically have GDP per capita in the range of $20,000 to $50, 000.

                Besides that, the level of GDP per capita clearly captures some of what we mean by the phrase standard of living plus most of the migration in the world, for example involves people who are moving from countries with relatively low GDP per capita to countries with relative high GDP per capita. The GDP focuses on production that is bought and sold in markets, the standard of living includes all elements that affect people’s well-being, whether they are market transaction of

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