Answer on Other Economics Question for abc123
Below are brief guidelines for country comparisons:
Compare countries: income levels.
One can use GDP per capita in dollar terms to compare incomes across countries. However, the comparison may be somewhat misleading because consumers face different prices in various countries. One thousand U.S. dollars can buy much more in Mexico compared to the U.S. as prices in Mexico are lower. To account for the differences in
prices, one should look at the GDP per capita in Purchasing Power Parity terms.
In that way, one compares countries in term of real income (what can be purchased) as opposed to the dollar income.
Compare countries: level of development.
The most basic comparison is between GDP per capita levels or the levels of GDP per capita in terms of Purchasing Power Parity. However, GDP can be a misleading measure as it may not capture other aspects of the quality of life such as crime, education, environmental quality, etc. The Human Development Index published by the UN is a composite measure that accounts for a broader set of development factors.
Compare countries: economic structure.
One should look at the shares of Agriculture, Industry, and Services in the overall value added of the economy.
Generally, lower income countries have a larger share of agriculture and the share of services expands as they develop.
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