What does GDP mean and how is it related to per capita income?
In: Economics
GDP is Gross Domestic Product, in simple terms it is the total of all the things of value made in the economy of a country in a year. GDP per capita is taking that total and dividing it based on the population to make the comparison more fair. A higher GDP per capita means that each working person in that country produced more “value” during the year.
GDP is mostly concerned with economic production – not income. While those things often correlate they do not have to. You can have a high GDP per capita with low income. The reason the 2 things are often related is that in order to generate high GDP per capita you often need a well trained, well educated, well equipped populous and naturally you have to pay those people more to stop going somewhere else where they will be payed more.
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