Why is measuring per capita GDP important in macroeconomics?

• A. It allows for comparisons of economic well-being across countries with different population sizes.
• B. It indicates the rate of inflation in an economy.
• C. It measures the total value of goods and services produced in an economy without considering population.
• D. It shows the distribution of income among individuals within a country.

Answer: (A)

Verified step by step guidance

1. Step 1: Understand what GDP (Gross Domestic Product) measures — it is the total market value of all final goods and services produced within a country in a given period.
2. Step 2: Recognize that total GDP alone does not account for the size of a country's population, so comparing GDPs of countries with different population sizes can be misleading.
3. Step 3: Define per capita GDP as the total GDP divided by the population size, which gives an average economic output per person: \(\text{Per capita GDP} = \frac{\text{GDP}}{\text{Population}}\).
4. Step 4: Explain that per capita GDP is important because it provides a more accurate measure of the average economic well-being or standard of living of individuals in different countries.
5. Step 5: Conclude that using per capita GDP allows economists and policymakers to make meaningful comparisons of economic performance and living standards across countries with varying population sizes.