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Economics of development
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GDP is the core measure of aggregate income used to measure total
production from a country or region over a given period of time (usually
a year, sometimes a quarter). You should have a quick catch up with what
you have learned from EC2065 Macroeconomics about GDP and be
able to distinguish between it and gross national product (GNP) .
GDP per capita (divided by population) is, therefore, the primary measure
of average individual income in a given country. As income is spent
on purchasing goods and services, GDP per capita could be a measure
of living standards. Development is concerned about comparisons of
living standards over time and across countries. In order to make GDP
comparable over time, we need to account for inflation. As prices go up
(inflation), the purchasing power of income falls. By choosing a base year
and using appropriate price indices, you can convert nominal GDP to real
or constant GDP. This will then capture the real change in living standards
relative to the base year for a given country
