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You are here: Home / Education / Is GDP per Capita the Same as Income per Capita?

Is GDP per Capita the Same as Income per Capita?

by Fxigor

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Is GDP per capita the same as Income per capita?
 GDP per capita is not the same as average income because  Gross domestic product measures how much every individual has contributed to the production. In contrast, per capita income measures the average income of every individual in the country.

Explanation :
GDP stands for Gross Domestic Product. It a measurement of a country’s overall economic activity. It helps to gauge the economic health of the country. Per Capita, on the other hand, means per person. Therefore, GDP per capita is the measure of a country’s economic output that accounts for the total number of people it has. It is achieved by dividing the country’s total GDP by the country’s total population in a particular year.

The income per capita measures the amount of money earned by each person in a certain region at a specified time. It is the average income per person for a country. It is achieved by dividing the country’s total income by its total population, it is used to measure the country’s standard of living. From these definitions, it is clear that there is a difference between GDP per capita and income per capita. They, however, are measures of a country’s living standards and economic health.

GDP per capita helps compare the country’s success depends on its population size. A country with a higher GDP per capita can be said to be economically healthy. While a country may have a high Gross Domestic Product, it may not necessarily result in a higher Gross Domestic Product per capita. Countries with very high population risk having an inferior Gross domestic product. For example, china ad a very high GDP in 2017, but its GDP per capita reduced significantly because of its high population. The higher the GDP of a country, the higher the country’s economic wealth of that country’s citizens. The income per capita is used to assess the country’s affordability, including health and housing. It has been criticized as a way of measuring the quality of life in a country because it fails to account for inflation and includes everyone in the population even children and foreigners. It also does not account for non-monetary activities that its members may be involved in. The difference between the Gross National Income (GNI) and Gross Domestic Income is that, while GDP only considers income made from within the country, GNI is more comprehensive.

The formula for achieving gross domestic per capita and gross national income per capita is similar, but differences exist.
The difference will only be noticeable if a country has a large population working outside the country because it would mean that the total population for its GDP and GNI duffer with a big number.

In conclusion, per capita income and Gross domestic income are very similar because they measure the country’s standard of living. However, they use different measures and measure other factors apart from the country’s economic health. Gross domestic product measures how much every individual in the country has contributed to production, while per capita income measures every individual’s average income. All of these factors show the health of the country’s economy. Therefore, they should not be different, but the fact that one considers the population in the country at that certain time while the other considers incomes from outside the country brings about a small difference between the two.

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Fxigor
Fxigor
Trader since 2007. Currently work for several prop trading companies.
Fxigor
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