Question

ST 4. Explain why a nation's per capita income-and, therefore, its standard of living- cannot deviate for any significant period of time from its GDP per capita.

Answer 1

GDP per capita is nothing but the GDP of the nation divided by the population of that country.

On the other hand income per capita is the average income of a person living in a country or region. So it is equal to total income divided by the population of the concerned region.

Income per capita is the mirror of standard of living of a country. Thus when the people in the country earn more income, it is reflected in their standard of living. When people consume more or spend more and they have higher incomes, this automatically means that the GDP is higher which further tells that GDP per capita is rising. Thus these 2 are different sides of the same coin. In a significant time frame they cannot deviate from each other as one is directly reflected by the other