Living Standards
Overview
How do we tell whether life in one country is better than in another, or whether a nation is getting better off over time? Economists reach for indicators of living standards, but no single number captures everything that makes a good life, so they use more than one.
In this lesson you will learn the two main measures of living standards: real GDP per head and the Human Development Index. You will see what each includes, where each falls short, and why differences in living standards arise both within and between countries. By the end you can judge which measure is more useful and when.
Objectives
- real Gross Domestic Product (GDP) per head
- Human Development Index (HDI) and its components
- advantages and disadvantages of real GDP per head and HDI as indicators
- reasons for differences in living standards and income distribution within and between countries
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Lesson Note
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Lesson Evaluation
Congratulations on completing the lesson on Living Standards. Now that youve explored the key concepts and ideas, its time to put your knowledge to the test. This section offers a variety of practice questions designed to reinforce your understanding and help you gauge your grasp of the material.
You will encounter a mix of question types, including multiple-choice questions, short answer questions, and essay questions. Each question is thoughtfully crafted to assess different aspects of your knowledge and critical thinking skills.
Use this evaluation section as an opportunity to reinforce your understanding of the topic and to identify any areas where you may need additional study. Don't be discouraged by any challenges you encounter; instead, view them as opportunities for growth and improvement.
- Real GDP per head is calculated as: A. real GDP multiplied by population B. real GDP divided by population C. population divided by GDP D. nominal GDP divided by inflation Answer: B
- The HDI combines income with which two other dimensions? A. health and education B. exports and imports C. saving and investment D. inflation and unemployment Answer: A
- Health in the HDI is measured by: A. number of hospitals B. life expectancy at birth C. GDP per head D. years of schooling Answer: B
- A weakness shared by both real GDP per head and the HDI is that they ignore: A. population B. income distribution C. life expectancy D. education Answer: B
- Two countries have the same total real GDP, but one has a larger population. That country will have: A. a higher GDP per head B. a lower GDP per head C. the same GDP per head D. zero GDP per head Answer: B
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