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It's my assignment. From the Blog. There are several different advantages which are as follows: Limitations and drawbacks include the following: Real GDP per Capita helps in measuring almost everything that the country creates in the entire year and is used for comparison of the living standard amongst the countries over the time which reflects the feelings of all the citizens about how prosperous is their country but at the same time it does not take into consideration cost of living of the person of their country, does not tell that how the wealth is spread in the country, does not take into consideration the details of earnings of the illegal workers in the country as well as the people who are working voluntarily in the country and does not give any indication on the spending power of the people of the country. 9 Advantages of Globalization. While this approach has advantages, there are also many criticisms on GDP as an indicator of standard of living or welfare. Can hide inequalities as it does not show the distribution of wealth. Student videos. Real GDP reflects the value which has been adjusted for inflation while nominal GDP reflects the value without considering inflation (Abel, Bernanke and McNabb, 1998). 806 8067 22 So, a major advantage of GDP is that it gives a clear indicator as to how well (or badly) an economy is doing. There are several "disadvantages" if that's what you want to call them. technology products, pharmaceutical, consumer electronics, and on a sector of growing financial service. GDP per capita is measured when GDP is divided by the number of people in the country. In 1980, when China and India in the gross domestic product (GDP) per capita more or less equal, China has enjoyed a strong advantage in manufacturing. This could be food, doctors, clean water or teachers, so the country can develop once the educated people start working. Over time, consumers could spend more replacing cheap goods than they would have if they had bought higher-quality goods in the first place, and GDP would grow as a result of waste and inefficiency. Three Advantages of using GDP/ GNP/ GNI as an indicator of development 1. so let us make an in-depth study on the advantages and disadvantages of globalization. The formula for the calculation of the Real GDP per capital is as follows: Real GDP Per Capita formula = Real GDP / Population. (Source: John Sloman, 2006) Hides extremes; Doesn't say how wealth is spread; Doesn't take the cost of living into account; Only takes money into account; Illegal workers and volunteers aren't included; Evaluation. |~ », Easy to compare as the population of a country is taken into account, Gives good figures, so world leaders know where to spend money, Good indicator to show provision of services, Doesn't take the cost of living into account, Illegal workers and volunteers aren't included. The major advantages to using GDP per capita as an indicator of standard of living are that it is measured frequently, widely and consistently. Real GDP per capita calculates an average figure, due to this it is not possible to get the output from it regarding the distribution of the income among the people of the country i.e., it does not tell that how the wealth is spread in the country. 1st advantage China has a more developed than in many developing countries and the balance of trade, China's much faster rate than India has been since the 1950s, manufacturing growth. 18th June 2019. Answer and Explanation: Become a Study.com member to unlock this answer! When the GDP is adjusted for inflation, it is called nominal GDP. Therefore, GDP may overestimate living standards in a country. Is it time to end our fixation with GDP and growth? Inaccurate Data GDP only takes reported consumption into account. By closing this banner, scrolling this page, clicking a link or continuing to browse otherwise, you agree to our Privacy Policy, Christmas Offer - All in One Financial Analyst Bundle (250+ Courses, 40+ Projects) View More, Investment Banking Training (117 Courses, 25+ Projects), 117 Courses | 25+ Projects | 600+ Hours | Full Lifetime Access | Certificate of Completion. GDP and GDP Per Capita. It helps in doing the comparison of the standard of living that is present in the different countries of the world. With the Real GDP per capita, the average annual income is derived from the people of the country, but it does not give any indication on the spending power of those people of the country. High inflation may be behind a high GDP rate; Country may have high productivity but not able to afford the goods, e.g. GDP also doesn't show how wealth is spread, as there could be a big rich-poor gap in a country. GDP measures exactly what it is said to measure, so it's hard to have disadvantages, but for the purpose of answering: 1) It doesn't take into account illegal and black market trading. finding it a bit difficult. Advantages of using GDP/GNP as an indicator: Disadvantages of using GDP/GNP and an indicator: A useful figure for comparing countries. Although GDP is easy to compare, it shows which countries are rich and poor, not which countries need specific funding from the UN. Increases inequality: Sometimes spending more on gross national investments (GNI) per capita can hide the widespread inequality within the country. Due to this Real GDP per capita does not tell the exact details of the average income of the country per citizen in a year. Per-capita GDP is a reasonable measure of a country's standard of living. It is possible that the fewer people in the country have the maximum amount of wealth and there could be huge amount of the gap between the rich and poor of the country. GDP or gross domestic product has always served as the most important factor in the calculation of the overall economic condition of the citizens, their standard of living and growth. Per capita GDP tells you, on average how much output each person provides to the economy, and is therefore a measure of economic health. This has been a guide to what is Real GDP Per Capita and its definition. This means that there is 20 times as much money per person in the UK compared to in India 2. Advantage of China Economic. Although the GDP per capita of a country may be very high, it may be the case that 10 percent of the country earn millions of times more than the other 90 percent of the country's inhabitants, who earn extremely low … Discussions above show that GNP per capita is an inadequate measure of economic development and social welfare. There are many advantages and disadvantages for GDP per capita. Although GDP is easy to compare, it shows which countries are rich and poor, not which countries need specific funding from the UN. Fifty years ago, the city-state of Singapore was undeveloped and lacks both arable land and natural resources with a GDP per capita of less than US $320. GNI figures provide a snap-shot indication of the huge difference between the more developed and less developed countries. Limitations and drawbacks include the following: One of the disadvantages if the real GDP per capita is that it does not take into consideration the cost of living of the person of their country into account while calculating it. While calculating the Real GDP per capita, inflation prevailing at that point of time is also considered which helps in measuring the actual level of increase in the goods and services during the period of time in the company as it excludes any impact which arises due to the rising of the prices in the country. In fact, "standard of living" and "per capita GDP" have come to be virtually synonymous. 806 8067 22, Registered office: International House, Queens Road, Brighton, BN1 3XE, geography - global development - how development is measured, Economics essay help on GDP and development! The GDP per capita the UK, on the other hand is $35 100 and was 36 th place in the world. », Economics Assignment . The main advantages of using GDP as a measure is that you can gauge the overall output of your domestic factories. In 2016, the GNP per capita in the UK was $43000 while in India it was only $1600. Advantages and Disadvantages of Globalization. Advantages of GDP are many, with some of the more important ones being a way to define the business cycle, the ability to understand shifts in a country’s economy, and a measurement for competitiveness in a global environment. 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