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How can GDP per capita and poverty rates indicate standards of living in the U.S.?

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successyes | Valedictorian

Posted May 25, 2013 at 11:41 PM via web

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How can GDP per capita and poverty rates indicate standards of living in the U.S.?

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pohnpei397 | College Teacher | (Level 3) Distinguished Educator

Posted May 26, 2013 at 12:06 AM (Answer #1)

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Gross Domestic Product (GDP) per capita and poverty rates are both measures that can be used to measure standards of living because they are both measures of how much money people have.  The two measures can be used to supplement one another.

GDP per capita simply takes the value of all the goods and services made in a country and uses that as an indication of how much money the country produces in a year.  It then divides that up among all the people in the country.  This gives a measure of how much money the average person makes in a year.  This is, of course, something that can help indicate what people’s standards of living are.

However, GDP per capita only tells us about averages.  It does not tell us if there are many really rich people and many really poor people or if there are many people clustered around the average GDP per capita.  Both of these situations could have the same GDP per capita but would be very different in terms of standards of living.  This is where poverty rates can be helpful.  They tell us what percentage of the country is making less than a certain amount of money.  It tells us how many people do not have enough money to have a decent standard of living.

In these ways, both of these measures can tell us things about our standards of living.

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