Definition
Gross domestic product per capita, or GDP per capita, is a measure of a country’s economic output that takes into account its population. It divides the country’s GDP by its population.
What is GDP per capita?
GDP of a country is calculated by measuring the monetary value of goods and services produced in the country over a specific period, usually a year. It is a measure of economic activity. This wealth is divided among the country’s population to determine the GDP per capita.
For example, according to the Bureau of Economic Analysis, the GDP of the United States in 2021 was $23.9 trillion. With a population of 332 million in 2021, according to the Census Bureau, this means that the GDP per capita in the United States was $71,343.
How does GDP per capita work?
Essentially, GDP per capita serves as a measure to determine the economic output of the country for each person living in it. Wealthier countries with smaller populations tend to have higher GDP per capita. Once you perform the calculations, the wealth is distributed among fewer people, which raises the GDP of the country.
The fact that GDP per capita divides a country’s economic output by its population makes it a good measure of the standard of living in the country, especially since it tells you how prosperous the country is for each of its citizens.
How to calculate GDP per capita
The formula is GDP divided by the population. If you’re looking at just one point in time in one country, you can use the “nominal” GDP divided by the current population. “Nominal” means that GDP per capita is measured in current dollars.
If you want to compare GDP per capita between countries, you should use a measure called purchasing power parity. It creates a balance between economies by comparing a basket of similar goods. It is a complex formula that assesses a country’s currency based on what can be purchased in that country, not just its value as measured by exchange rates.
Global economies and GDP per capita using purchasing power parity
The United States is the third most populous country after China and India. According to the CIA World Factbook (which is the basis for all the comparisons that follow), the real GDP per capita for the United States in 2020 was $60,200, placing it 17th in ranking.
Note: GDP per capita allows you to compare the prosperity of countries with different population sizes.
China, which has the largest economy and population, has a GDP per capita of $16,400. This places it 102nd on the list.
India, the second most populous country in the world, has an estimated GDP per capita of around $6,100, ranking it 163rd in the World Factbook.
Countries with the highest GDP per capita
Countries with the highest economic output per capita have booming economies and small populations. The top 10 countries by GDP per capita according to the CIA World Factbook are:
– Liechtenstein: $139,100
– Monaco: $115,700
– Luxembourg: $110,300
– Singapore: $93,400
– Ireland: $89,700
– Qatar: $85,300
– Isle of Man: $84,600
– Bermuda: $81,800
– Cayman Islands: $73,600
– Falkland Islands: $70,800
Countries with the lowest GDP per capita
The poorest countries in the world, in terms of GDP per capita, according to the CIA World Factbook are:
–
Burundi: $700
– Somalia: $800
– Central African Republic: $900
– Democratic Republic of the Congo: $1,100
– Niger: $1,200
– Mozambique: $1,200
– Liberia: $1,400
– Malawi: $1,500
– Madagascar: $1,500
– Chad: $1,500
Key Conclusions
– GDP per capita is the economic output of a country divided by its population.
– It is a good representation of the standard of living in the country. It also describes how well citizens benefit from their country’s economy.
– The corresponding purchasing power compares the economic output of different countries using a standard measure based on a common basket of goods and services.
Source: https://www.thebalancemoney.com/gdp-per-capita-formula-u-s-compared-to-highest-and-lowest-3305848
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