Question

From 1948 to 2003 the United States experienced an average real GDP growth rate of 3.5 percent and Guatemala had an average real GDP growth rate of 3.6 percent from 1993 to 2003. Can we say that Guatemala's standard of living grew more than the United States' standard of living from 1993 to 2003

Answer 1

Answer:

No, and that statement is probably false.

Explanation:

Generally when we want to compare the standard of living of country  to another country, we must measure real GDP per capita which accounts for both changes in the GDP and changes in the country's total population. Currently some organizations use the purchase power parity (PPP) to better compare the nominal GPD per capita since the PPP tries to account for differences in domestic prices of goods between countries. E.g. a house in the US is worth at least 10 houses in Guatemala, so a citizen of Guatemala needs a much smaller amount of money to purchase a house.

There is also a statistical comparison error, since one measurement includes 10 years, while the other includes 55 years. If you want to compare both economies you would either use information regarding the American economy during 1993-2003, or you would need information regarding the economy of Guatemala during 1948-2003.

Third but not least, countries that are very poor tend to grow at higher rates than rich countries, and the US is the richest country in the world while Guatemala is one of the poorest countries. For instance, in 2019, the size of the US economy was $21,427,100 million, while the size of the economy of Guatemala was $81,318 million. A 1% increase in the American economy represents a 263% increase in the economy of Guatemala. Even though poor economies grow at higher rates, it doesn't mean that the change is significant enough to improve their standard of living.

Answer 2

Answer:

No, we can’t say

Explanation:

In this question, we are asked to decide if we can say that Guatemala’s standard of living grew more than that of the US’ standard of living between the years 1993 and 2003 given the pointers in the question.

We cannot say that this is correct because of the following reasons;

As observed from the question, the US growth rate was calculated between the years 1948-2003, which is indicative of a 55 year span. Now, comparing this with that of Guatemala, we can see that the span here is just 10 years I.e from 1993 to 2003.

Also, we were not provided with the population growth rate in both countries and this makes it difficult to judge which of the two countries have a better growth in terms of standard of living