What is the gross domestic product?
GDP is an abbreviation of gross domestic product. It is the total value of products and services created within the borders of one country in a year. Translated: GDP represents any economy of the country. As a result, employment and wages are rising, so people have higher incomes and spend more. When a gross domestic product is falling, the country is going through a recession. People have less money and pay less or buy fewer products.
What is GDP per Capita?
GDP per capita or per capita is the country’s total gross domestic product divided by the number of inhabitants. The critical statistic used to track economic growth is real gross domestic product per capita. We measure it by the purchasing power parity method (PPP), and the amounts are in dollars.
The PPP method is more helpful in comparing living standards between countries because it considers the cost of living and the inflation rate, rather than a more straightforward comparison of nominal amounts that may not show fundamental income differences. The income of the typical family grows typically more or less in proportion to per capita income. For example, a 1% increase in real gross domestic product per capita corresponds roughly to a 1% increase in the median or typical family income.
Countries abundant invaluable natural resources, such as highly fertile land of rich mineral deposits, have higher real gross domestic product per capita than less fortunate countries.
How to calculate GDP per Capita?
The GDP per Capita formula computes the average of a country’s economic production divided by its whole population. In other words, it is the equitable distribution of the country’s gross domestic product to each citizen in order to represent the country’s quality of life.
GDP per Capita is a measure of a country’s economic production that considers its population or the number of people. The formula divides the nation’s gross domestic product (GDP) by the number of people, or, in other words, the total population of the country. This would be a more accurate assessment of a country’s level of life. Furthermore, if only one moment in time is being considered, Nominal GDP can be utilized, but Real GDP makes more sense when comparing throughout time.
GDP Per Capita = GDP of the Country / Population of that Country
GDP per Capita and inequality
The connection between aggregate output and income distribution is a critical subject in macroeconomics. The significance of income disparity in economic development has recently garnered a lot of attention in policy circles and the press. For example, the World Bank Group has identified eradicating extreme poverty and raising the incomes of the lowest 40% of developing nations as important global development objectives.
Increases in income inequality result in weaker transitional GDP per Capita growth. Increases in income inequality have a negative long-run effect on GDP per Capita.
While the average effect of income inequality on GDP per Capita is negative and substantially different from zero, it differs per country. At the 1% level, the coefficient on the interaction term in an econometric model that contains an interaction term between starting GDP per Capita and income inequality is negative and substantially different from zero. The magnitude of the coefficient on the interaction term indicates that variations in beginning income significantly affect the impact of changes in income inequality on GDP per Capita.
Nations with the highest GDP per capita (table)
The table below shows the ranking of the ten countries with the highest gross domestic product per capita rate since April 2019, confirmed by the International Monetary Fund (IMF).
|Country||GDP per capita (USD)||GDP ($B, USD)||Population (M)|
We can note that Luxembourg is at the top of the scale and has significantly more significant differences than other countries. Luxembourg is a country with a tiny population and countries with the most considerable energy exports and business powerhouses. On the other hand, we can observe the US. A country with a high ranking in population still has a deficient level of gross domestic product per capita.
The annual growth rate of real GDP per Capita 2020
A considerable reduction of the GDP growth rate, to -4.3 per cent, is nowcast for 2020 in the face of the COVID-19 pandemic. World real GDP per Capita grew by 1.4 per cent in 2019. Large disparities in GDP per Capita remain across the world.
Gross national income per Capita
The GNI per Capita is the monetary value of a country’s final income divided by its population in a year. It should be representing the average before-tax income of a country’s inhabitants.
Knowing a country’s GNI per Capita is a useful first step toward understanding the country’s economic strengths and needs and the overall standard of life experienced by the ordinary person. A country’s GNI per Capita tends to be strongly related to other metrics that assess the social, economic, and environmental well-being of the country and its people. All data is in U.S. dollars.
GDP per Capita by country
The numbers provided here do not take into consideration changes in the cost of living in different nations, and the results fluctuate considerably from one year to another depending on movements in the exchange rates of the country’s currency. GDP per Capita is frequently regarded as an indicator of a country’s level of living. However, this is problematic because GDP per Capita is not a measure of personal income.
Comparisons of national income are also commonly done on the basis of purchasing power parity (PPP) to compensate for differences in the cost of living in various nations. PPP substantially addresses the exchange rate problem but not others; it does not reflect the value of economic production in international commerce, and it also takes more estimating than GDP per Capita. Overall, PPP per Capita statistics are more tightly dispersed than nominal GDP per Capita data.
Non-sovereign entities (the world, continents, and some dependent territories) and states with limited international recognition (such as Kosovo, Palestine and Taiwan) are included in the list in situations in which they occur in the sources.
GDP per Capita example
Country X is a tiny rising economy. Last year the country has declared its GDP around $400 million, and the population of the country as per the last census data available is 200,000. You are necessary to compute GDP per Capita or nation X.
GDP Per Capita = GDP of Country / Population of Country = $400,000,000 / 200,000 = $2000
Visit our GDP Calculator (Gross Domestic Product), which enables you to compute the aggregate domestic production produced in a specific nation in a nominal term. In the following, you will get familiar with the logic of this calculator, and you will be able to answer promptly the question: “how to calculate nominal GDP?” We will also discuss the distinction between real and nominal terms coupled with an alignment of certain relevant concepts. Also, for more calculators in math, physics, finance, health, and more, visit our CalCon Calculator official page.