ASSIGNMENT

Assignment



Assignment

Question 1

Per Capita Income

Per capita income is closely linked with national income. Income refers to all economic inputs received by a person, a family, a company, an organization, etc.. National income is the sum of all individual income of nationals of a country.

Per capita income is a calculation is done to determine the income you receive, on average, each of the inhabitants of a country, that is, on average, how much is the income received by a person to survive. This estimate is obtained by dividing the national income among the population of a country.

Per Capita Income = National Income (NI) / Total population (PT)

When looking at this relationship, we can deduce that, to improve the per capita income of a nation, you need the national income grow more than the total population because, otherwise, the per capita income is reduced.

This calculation is important when one wants to study the average standard of living of the population. The per capita income of different countries allows comparisons between them and thus set the pace of progress of a country.

Weakness of Relying On Per Capita Income

Despite of using per capita income of the country as the national wealth indicator, when using it as common currency, it does reflect several weaknesses.

Per capita income measurement doesn't include some monetary income, such as artistry or homemaking. The economic activities do have the impact on the country income; however, it varies from one country to another.

One cannot measure the distribution of money depending on the per capita income calculation. This effects the outlier of proportion will have the disproportionate effect on the income overall.

Depending on the per capita income of the nation, one cannot calculate or compare the per capita income of two different counts, as the value of the currency in each country is different. So the per unit cost and the income level is also different in each nation. However, if the inflation is properly controlled, the country then can measure and compare their income level, based on the current per capita income, in order to check the growth of the country's income level between two years.

Take an example to better understand the scenario. The per capita income of Qatar in year 2011 was 179,000 (US$), while it was 47,200 (US$) in United States. Depending on this situation, it shows that Qatar is the top of the list, as the per capita income is higher. However, if we focus on the economy facts, Unite States is on the top of the list with the best economy in the world. Besides, per capita income, there are numbers of factor that contributes in the betterment of the economy.

Question 1 c

International comparisons are not easy to do. Despite efforts to harmonize the statistical methods used by states retain national particularities that should not be overlooked when one wishes to make comparisons between countries. In addition, public policies establish institutional arrangements in each country leading sometimes to different accounting ...