Limitations of GDP: Comparing Living Standards between Countries

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‘‘WITH THE REFERENCE TO THE UK AND A COUNTRY OF YOUR CHOICE, DISCUSS THE LIMITATIONS OF ‘GDP PER CAPITA’ AS A BASIS FOR COMPARING LIVING STANDARDS BETWEEN COUNTRIES AND OVER TIME’’

INTRODUCTION
From the late ‘40s a lot of countries started to develop very quickly, despite the wars. Every country realised its strong points of growing economically, and this was their resources. Some countries have more land, some countries have more water, some have more oil and some have more gold. Knowing this every country started organizing its economy in order to become more powerful toward others. And to know who is developing more, there must be a standard measurement of the people living in a certain country and the value of the standard goods produced by this country. This is measured by GDP (Gross Domestic Product) and GDP/capita (GDP per person). GDP/capita is measured by dividing the total value of the GDP by the number of the population of the country. Now that we have a point of measurement that gives us information about the well being of the population of a country and its production of goods, we can easily compare between them. In this case, I would like to compare two of the most powerful ‘examples’ of world’s economy: UK and China. China and UK are placed as the 2nd and 7th countries in the world by GDP. China’s GDP measures a value of $ 10,085,708,000,000 (10 trillion) while UK $ 2,172,768,000,000 (2.17trillion). These numbers clearly show that China’s economical power is ahead of UK, but does this mean that the Chinese are happier than the British? The GDP/capita is measured by dividing the total GDP by the number of population. In this case the GDP/capita of UK will be $ 36,120 while the Chinese GDP/capita is only $ 4,382. People say: ‘money does not bring happiness’, but we clearly know that in economics it is money that brings the happiness.

GDP COMPARISON OVER TIME :
GDP in China expanded 9.7 percent until March 2011,...
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