GDP in Different Countries
The first part of the assignment focused on exploring Gross Domestic Product (GDP), population, and GDP per capita in different countries. The first part of the assignment focused on retrieving data about GDP and population of 20 randomly selected countries for 2021 from the World Bank (n.d.) and calculating GDP per capita by dividing the GDP by the total population. The data is provided in Table 1 below.
Table 1. World Development Indicators for 2021
The data provided above demonstrates that, among the selected 20 countries, the US had the largest GDP of $ 23.315 trillion, and Mongolia had the lowest GDP of $15 trillion. Here is the list of countries from the largest to the lowest GDP in 2021:
- United States,
- China,
- Japan,
- Germany,
- India,
- United Kingdom,
- Italy,
- Canada,
- Brazil,
- Australia,
- Nigeria,
- South Africa,
- Bangladesh,
- Egypt,
- Denmark,
- Finland,
- Iraq,
- Croatia,
- Belarus,
- Mongolia.
However, if one examines the GDP per capita index, the order of the countries differs considerably. While the US remains first in the rankings, China jumps from second to 11th place. Here is the list of countries from the largest to the lowest GDP per capita in 2021:
- United States,
- Denmark,
- Australia,
- Finland,
- Canada,
- Germany,
- United Kingdom,
- Japan,
- Italy,
- Croatia,
- China,
- Brazil,
- Belarus,
- South Africa,
- Iraq,
- Mongolia,
- Egypt,
- Bangladesh,
- India,
- Nigeria.
The difference in the ranking between GDP and GDP per capita is due to the differences in the sizes (population) of the countries.
Significance and Interpretation of the D
The analysis of the data provided above is crucial for understanding the difference between the country’s wealth and the wealth of its population. A country’s GDP is understood as the total value of all the services and products a country produces during a specific period of time (Fernando, 2022). GDP is used as a measure of a country’s economic prosperity, as it demonstrates its economic potential (Fernando, 2022). GDP per capita demonstrates the economic output of a country per person.
In other words, while GDP demonstrates the overall economic potential, GDP per capita is a measure of the living standards of the population. The analysis of the data provided above demonstrates that an increase in GDP is not necessarily associated with growing economic prosperity among a country’s citizens, as GDP increases naturally with population growth. Thus, calculating GDP per capita is crucial for understanding the wealth of a country’s population.
Reflection on Learning Outcomes
I learned several crucial skills while completing this part of the assignment. First, I practiced retrieving data from the World Bank and making simple manipulations using Microsoft Excel. Second, I learned to calculate GDP per capita using the data I had acquired. Finally, I learned the difference between GDP and GDP per capita and which measure one should use for measuring economic prosperity.
Index of Economic Freedom
The second part of the assignment involved comparing the Index of Economic Freedom to the GDP per capita of the 20 selected countries. The data for the analysis were obtained from the Index of Economic Freedom (2023) and organized into a table that included the country’s name, scores for economic freedom, business freedom, trade freedom, property rights, and financial freedom, as well as GDP per capita. Table 2 below provides the organized data.
Table 2. Economic Freedom vs GDP per Capita
After the data was acquired, the rankings of economic freedom were compared to the rankings of GDP per capita. The comparative analysis revealed a strong correlation between various economic freedom indices and GDP per capita. For instance, Australia was ranked third in terms of GDP per capita, third in terms of economic freedom, fifth in terms of business freedom, first in terms of business freedom and financial freedom, and seventh in terms of property rights. Similarly, Japan was ranked 8th in terms of GDP per capita and 9th in terms of economic freedom.
However, there were exceptions to the overall rule. For instance, China was ranked 11th in terms of GDP per capita, while it was last in terms of economic freedom score. However, it is worth noting that China’s trade freedom rank was 13th among the 20 countries.
Pearson’s correlation coefficient was used to measure the correlations between the different aspects of economic freedom and GDP per capita. Pearson’s correlation coefficient measures the magnitude of the relationship between two variables on a scale of -1 to 1, where -1 represents a perfect negative correlation, 1 represents a perfect positive correlation, and 0 represents no correlation (McClaive et al., 2018).
The analysis revealed a robust positive correlation between the index of economic freedom and GDP per capita (Pearson’s r = 0.82). The correlation score was higher between financial freedom and GDP per capita (Pearson’s r = 0.85), business freedom and GDP per capita (Pearson’s r = 0.9), and between property rights and GDP per capita (Pearson’s r = 0.92). However, the relationship between trade freedom and GDP was weaker than that between economic freedom and GDP per capita (Pearson’s r = 0.71).
Significance and Interpretation of the Data
The analysis conducted in this paper is crucial for governments, as it demonstrates how citizens’ wealth can be improved through the implementation of policies associated with economic freedom. The analysis provided above suggests that if a country wants to improve the economic wealth of its citizens, it should improve its financial freedom scores. In particular, the analysis of correlations between economic freedom and GDP per capita suggests that policymakers can use the economic freedom scores to inform necessary adjustments that improve GDP per capita.
Reflection on Learning Outcomes
I learned crucial skills from the second part of the assignment. On the one hand, I learned how to collect data from different sources to make a relevant dataset. On the other hand, I practiced my ability to correlate variables using rankings and Pearson’s correlation coefficient. This knowledge will help me in the future to study relationships between economic and financial indices.
References
Fernando, J. (2022). Gross Domestic Product (GDP): Formula and How to Use It. Investopedia. Web.
Index of Economic Freedom. (2023). Country Rankings. Heritage. Web.
McClaive, J., Benson, G., & Sincich, D. (2018). Statistics for business and economics. Pearson.
World Bank. (n.d.). World Development Indicators. Web.