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To what extent are Real GDP per capita figures an accurate measure of relative standards of living internationally?
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To what extent are Real GDP per capita figures an accurate measure of relative standards of living internationally? Real GDP per capita is measured in the following way. The raw GDP figure is calculated by the summation of Consumer Expenditure (C), Government Expenditure (G), Investment (I), and Exports (X) - Imports (I), over the period of one year. The equation for this is as follows: GDP = C + I + G + (X - M) To convert this GDP figure into a 'Real' GDP figure one must take off the effects of inflation. This is done by taking the GDP figure calculated above, and multiplying it by the RPI from the previous year divided by the RPI from the current year giving: Year 2 Real = Year 2 Nominal x (Year 1 RPI / Year 2 RPI) Finally to convert this figure into Real GDP per capita one must divide this figure by the...
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