Question

1. Find the World Bank World Development Indicators on-line by going to the ​databank​ and clicking “more indicators.”

   1. There are two GDP per capita indicators that are calculated using purchasing price parity. They are GDP per capita, PPP (current international $) and GDP per capita, PPP (constant 2011 international $). What is the difference between the two GDP per capita variables?

   2. Download GDP per capita, PPP (current international $) for the following countries: Brazil, Russia, India, China, South Korea, Mexico and Turkey for 2003-2018.

   3. According to the numbers how does an average person’s income in Mexico compare to
      an average person’s income in South Korea in 2018? If you had $1,000 could you buy more in India or in Russia in 2018? Why?

   4. Calculate the average annual growth rate from 2013 to 2018 in all six countries. Hint: to calculate the average annual growth rate (or arithmetic growth rate) take the sum of each year's annual growth rate and divide by the number of years.

   5. What does Brazil’s average annual growth rate imply?

   6. Calculate the implied compounded annual growth rate (or geometric growth rate) from 2013 to

      2018 in all six countries. Hint: we did this in class. How does the average annual growth rate

      differ from the compounded annual growth rate from 2013 to 2018? Why?

   7. Calculate the implied compounded annual growth rate from 2003 to 2018 in all six countries. If you were to calculate the average annual growth rate from 2003 to 2018 how would you think it

      would differ from the compounded annual growth rate?

Answer 1

The difference between GDP per capita PPP (current international dollar) and GDP per capita PPP ((constant 2011 international $) is described below:

GDP per capita PPP (current international dollar) is the value of gross domestic product of an economy that is converted to international dollars based on the current rates of purchasing power parity. This PPP at international $ has the same purchasing power that of US$ as described by World Bank.  

GDP per capita PPP (2011 international dollar) is the value of GDP calculated at international dollar value fixed at 2011 prices.

The basic difference is that the former is calculated at current PPP rate and the latter is calculated at constant PPP rate.