When we talk about a country’s economic performance, one of the most common indicators we hear about is its GDP. However, GDP alone does not provide a complete picture of a nation’s economic health. This is where GDP per capita comes in – learn more about it below.
What Is GDP Per Capita?
The Gross Domestic Product (GDP) is the total monetary value of all goods and services produced within a country’s borders.
The GDP per capita definition, on the other hand, refers to a measure of a nation’s economic output per person. It takes into account the size of a country’s population and provides a more accurate representation of its economic growth and development.
What You Need To Know About GDP Per Capita
GDP per capita is an essential economic indicator that helps measure a country’s standard of living. A high GDP per capita means that a country’s citizens are relatively wealthy and have access to a higher standard of living.
GDP per capita is calculated by dividing a country’s GDP by its population. For example, if a country has a GDP of $100 billion and a population of 50 million people, the GDP per capita would equal $2,000. This means that on average, each person in that country contributed $2,000 to the economy.
GDP per capita can be affected by several factors, namely:
- Population growth, which can dilute the GDP per capita, as the economy has to support more people with the same level of resources.
- Inflation, which can reduce the purchasing power of a country’s currency, leading to a decrease in GDP per capita.
- Income inequality, which can result in a small percentage of the population contributing a significant proportion of the country’s GDP. This can skew the data and make it appear that the country’s citizens are wealthier than they actually are.
Note that GDP per capita is also often used to compare the economic performance of different countries and helps policymakers identify areas that need improvement to enhance the standard of living of their citizens.
