You find that real GDP per capita in Burundi is $800 while real GDP per capita in the United States is $50,000. What is misleading about these figures when comparing standards of living?

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Business

Ronan Barron

2 January, 17:50

You find that real GDP per capita in Burundi is $800 while real GDP per capita in the United States is $50,000. What is misleading about these figures when comparing standards of living?

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Answers (1)

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Nathaly Dennis · Answer 1

Answer: The amount of people live in the countries are different.

Explanation:

It is common for a country to use GDP as economic prosperity or living standards. When comparing the GDP of different countries for this purpose, two problems arise immediately.

1) The GDP of a country is measured in its own currency, for example, the US uses one US dollar; Most Western Europe countries use euros. Therefore, comparing GDP between the two countries requires its conversion into a common currency. However, currencies have already been changed (the Burundian franc was replaced by the US Dollar).

2) The countries have a very large number of people. For example, there are more than 250 million people in the United States and 12 million people in Burundi, so that will cause problems.

The problem is, while the exchange of currencies and comparisons is a good thing, we need to make sure we have a good comparison of demographic data and the number of people, so that we can analyze the GDP differences between these countries.