Question

Last year country A had a nominal GDP of $600 billion, a GDP deflator of 150 and a population of 40 million. Country B had a nominal GDP of $720 billion, a GDP deflator of 120 and a population of 50 million. From these numbers which country is likely to have had the higher standard of living?

Answer 1

Country B

Step-by-step explanation:

To determine which country has a higher standard of living, we have to find the per capita GDP.

Per Capita GDP = real GDP/ population

Real GDP = nominal GDP / GDP deflator

Country A's real GDP = $600 billion/ 150 = $4 billion

Country B's real GDP = $720 billion / 120 = $6 billion

For country A, per capita GDP = $4 billion / 40 million = $100 million.

For country B, per capita GDP = $6 billion / 50 million = $120 million.

Country B has a higher standard of living because it's per capita GDP is higher than country A.

I hope my answer helps you.