21.3 The Uses and Limitations of Real GDP
MyEconLab Concept Video
We use estimates of real GDP for three main purposes:
To compare the standard of living over time
To track the course of the business cycle
To compare the standard of living among countries
The Standard of Living Over Time
A nation’s standard of living is measured by the value of goods and services that its people enjoy, on average. Income per person determines what people can afford to buy and real GDP is a measure of real income. So real GDP per person—real GDP divided by the population—is a commonly used measure for comparing the standard of living over time.
Real GDP per person tells us the value of goods and services that the average person can enjoy. By using real GDP, ...
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