National Wealth

… a core concept in Macroeconomic Policy

Click for MRU video

Click for MRU video

Concept description

This concept examines how countries differ in various measures of wealth and progress.

In introducing his video (reference below and link to right) Alex Tabarrok says:

“We know that there are rich countries, poor countries, and countries somewhere in between. Economically speaking, Japan isn’t Denmark. Denmark isn’t Madagascar, and Madagascar isn’t Argentina. These countries are all different. But how different are they? That question is answered through real GDP per capita – a country’s gross domestic product, divided by its population. In previous videos, we used real GDP per capita as a quick measure for a country’s standard of living.

“But real GDP per capita also measures an average citizen’s command over goods and services. It can be a handy benchmark for how much an average person can buy in a year – that is, his or her purchasing power. And across different countries, purchasing power isn’t the same. Here comes that word again: it’s different. How different? That’s another question this video will answer. In this section of Marginal Revolution University’s course on Principles of Macroeconomics, you’ll find out just how staggering the economic differences are for three countries – the Central African Republic, Mexico, and the United States. You’ll see why variations in real GDP per capita can be 10 times, 50 times, or sometimes a hundred times as different between one country and another.

“You’ll also learn why the countries we traditionally lump together as rich, or poor, might sometimes be in leagues all their own. The whole point of this? We can learn a lot about a country’s wealth and standard of living by looking at real GDP per capita.”

MRU practice questions

See http://www.mruniversity.com/node/329132, accessed 22 April 2016.

  1. Mexico and Bulgaria have roughly the same GDP per capita in 2014. Based on what you’ve learned in the video, is Bulgaria closer in GDP per capita to the United States or to the Central African Republic?

Source

Alex Tabarrok, Basic Facts of Wealth, Marginal Revolution University, at http://www.mruniversity.com/courses/principles-economics-macroeconomics/gdp-per-capita-purchasing-power-parity-example, accessed 22 April 2016.

Atlas topic and subject

Wealth of Nations and Economic Growth (core topic) in Macroeconomic Policy.

Page created by: Ian Clark, last modified on 22 April 2016.

Image: Alex Tabarrok, Basic Facts of Wealth, Marginal Revolution University, at http://www.mruniversity.com/courses/principles-economics-macroeconomics/gdp-per-capita-purchasing-power-parity-example, accessed 22 April 2016.