Question

To understand the standard of living across countries, one should look at:
• [A.] Per Capita Income (PCI) across countries based on a Standard International Currency
• [B.] Purchasing Power Parity (PPP) across countries
• [C.] Head Count Index across countries
• [D.] Political instability across countries Choose the correct answer from the options given below:

• A. A and C only
• B. A and B only
• C. C and D only
• D. B and D only

Hint:

To compare living standards across countries, economists commonly use:
• Per Capita Income.
• Purchasing Power Parity (PPP). PPP provides a more realistic comparison because it adjusts for differences in prices.

Answer 1

The Correct Option is B

Concept: The standard of living of people across countries is generally compared using income-based measures that account for differences in purchasing power. The most commonly used indicators are:
• Per Capita Income (PCI).
• Purchasing Power Parity (PPP).

Step 1: Examine each statement.
• [(A)] Per Capita Income expressed in a common international currency helps compare income levels across countries. Correct.
• [(B)] Purchasing Power Parity adjusts for differences in price levels and is one of the best measures of living standards. Correct.
• [(C)] Head Count Index measures poverty, not the overall standard of living. Incorrect.
• [(D)] Political instability affects development but is not a direct measure of living standards. Incorrect. Thus, \[ \boxed{A \text{ and } B} \] Hence, \[ \boxed{\text{Correct Answer}=(B)} \]