Question

1.Why is GDP per capita a better measure of well-being in a country than its natural resources?

2.When would you use the Rule of 72?

3.Say that two countries had GDP per capita of $10,000 50 years ago and today one has GDP per capita of $20,000 and the other of $40,000. Explain why this second country had or did not have twice the annual growth rate of the first country.

4.For this question, first calculate and report the per capita median income of all countries with data for the year 2010. Now, as you saw with the extract from the Penn World Tables, a typical annual growth rate from 1960 to 2010 was about 2% a year. Do you think that this means that the typical country has been growing at 2% for many centuries?

Answer 1

1. GDP per capita tells us about the income and expenditure of the average person living in a particular country while it indicates society’s standard of living which directly affects people’s happiness. On the other hand, having abundant or less natural resources doesn't tell us about the same. We can take the example of Singapore which is a country having almost no natural resources has one of the highest living standards in the South East Asia having per capita GDP of 64,581.94 USD (2018). From the above we can conclude that GDP per capita is a better measure of well-being in a country than its natural resources.

2. The Rule of 72 used to know the time taken (close approximation) by an investment to be duplicated with a fixed annual rate of interest. We get a rough estimate of the time period by simply dividing 72 by the annual rate of return.