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Two countries have the same nominal GDP per capita but one has a lower price level. Which conclusion is more appropriate from a purchasing-power perspective?

Answer and explanation

Correct answer: The lower-price country can buy more goods with the same income

Purchasing power means the quantity of goods and services that a given income can buy. If nominal GDP per capita is equal but prices are lower in one country, the same nominal income purchases a larger basket there, so its real purchasing power is higher. Option C is correct. Nominal equality does not guarantee equal real living standards, and options B and D reverse or deny the role of prices. A would require comparable prices and other conditions.

Related tags

Purchasing-PowerPrice-LevelReal-IncomeGdp-ComparisonGdp And WelfareNational Income And Related AggregatesEconomicsClass 11 Mcq

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