Question

What are the two main difficulties that arise in comparing the GDP of different countries?

Answer 1

Answer:

1)The variety of currencies in countries

2) Different numbers of people in countries

Explanation:

In the world, the best or almost perfect way for a country to measure economic prosperity or living standards is to calculation of GDP . While comparing the GDP of different nations or group of countries, two problems arise immediately.

1) The problem of different currencies because  GDP of a country is calculates in its own currency, that's why the problem appears quickly;  for instance, US uses USD; Most Western Europe countries use Euro as a currency; Japan uses yen; Mexicans use pesos. Therefore, when we need to compare GDP between two countries, we will urgently should do the  conversion into a common currency one.

2) The problem of different numbers of people. So, the countries could have a very large number or absolutely diverse numbers of people and it will take the problem in. Though some countries have more people or citizens than others, but it does not mean  purely higher GDP, therefore, whether we compare living standards across countries, we will have to divide GDP by population amount.