Do you have a bank account? Do you know how much money you have in your account? How do you measure wealth? If you are a person, it is not that difficult to do as most people know how much money they have. However, this is much more difficult to do if you are measuring an entire country's wealth. In this activity, you will learn some of the ways in which wealth is measured to understand better how wealth is distributed around the world.

It is difficult, however, to have a good quality of life if basic needs such as food, water, clean air, and shelter are not met. This is the reality for much of the world's population. All countries have people who live in poverty, but in many countries, people live in extreme poverty with little or no opportunity to escape it.

There are two sets of numbers that clearly demonstrate the extremes of poverty and wealth that exist in the world.

They are the:

gross domestic product (GDP) and

gross national income per capita (GNI)

This data is used as a measure of a country's standard of living. Let's first take a look at GDP.

Although the GDP gives an indication of a country's wealth, it can be misleading because it does not account for different population size. Two nations may have the same gross domestic product, but if one of the nations has a much larger population, each person will get a smaller share.

Take a look at the image below. As you can see, the top image shows eight candies between two children, which would give them four candies each. This would be the same if we were talking about one nation with only two people. If there was $8 million dollars and only two people, each person would receive $4 million dollars each.

KAE Studio (Learnalberta.ca)

However, what if there was a country that had $8 million dollars, but they had four people. This time, each person would now receive only $2 million dollars each. This clearly shows that if a nation has a much larger population, each person would get a smaller share. Now think about some of the countries that have a very large population. China has over a billion people! Therefore, if the country's money was shared among all of those people, you can see how they would all receive a much smaller share!

For comparing wealth between nations, a better tool is the gross national income per capita (per capita means per person). This is calculated by dividing the gross domestic product by the total population of that nation. Everyone in the nation, including people who do not work or work part-time as well as those who are too young or too old to work, is included.

We use per capita measures to give us a guide to tell us how much each person earns on average. Income per capita is a way of measuring the standard of living for all of the people in a country.

Neither of these measures considers other important variables such as the amount of taxes a person must pay, cost of living, availability of universal health care, or other government-funded support programs. What they do show, however, is the huge differences between nations.

The world is divided into three groups when considering wealth — the haves, the have-nots, and developing (or emerging) nations. The next lessons will study each of these different types of countries.

Self-check!

Digging Deeper!