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As an economist how would you compare living standards in the UK with those in Iraq?

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Introduction

LIVING STANDARDS As an economist how would you compare living standards in the UK with those in Iraq? Living standards can be measured and therefore compared using many different facts and figures. However living standards are qualitative and therefore very difficult to measure. The most common method of measuring the living standards between UK and Iraq would be to use Gross Domestic Product (GDP) figures. GDP is a measure of a country's national income, output or expenditure at current prices. Nominal GDP is calculated without taking reference to inflation whereas Real GDP does take inflation into account, thus Real GDP is a better measure to use when comparing living standards. A lot of factors affect the standard of living a country and affect how that is measured. For instance the populations for both UK and Iraq differ, this would have to be taken into account when comparing both countries. If it wasn't then the comparison wouldn't be fair, as if both countries had the same level of Real GDP however Iraq had half the population ...read more.

Middle

For the most accurate conclusion I would try my best to use a combination all the data mentioned above to compare the standard of living. However Real GDP per capita is still the most important indicator I believe we have and that would be the most influential piece of data available. What problem would you have in carrying out the take and how would you overcome them? Comparing national income statistics between economies is difficult and very time consuming. There are many problems as many factors play their part. Income distributions are rather different in the UK in comparison to Iraq. Populations also differ and thus it is important to compare per capita income figures. National income figures will have varying degrees of accuracy, caused, for instance, people trying to evade taxes and under declaring their incomes or not declaring them at all. The sizes of the hidden economies in each country vary. In the UK it is believed to be between 7-15% of GDP. ...read more.

Conclusion

Distribution of income is an important factor of standard of living. However it is hard to include in the measuring of an economy's standard of living. Using tax forms details to construct data tables, which can be shown by the Lorenz curve, can solve this problem. The Lorenz curve compares the percentage of income against the percentage of population. Iraq also has many great natural resources, which should be taken into account. Such as resources of oil. The oil industry in Iraq provides a large proportion of national income. Thus the top 5-10% of the population earns the majority of the national income, which means the rest of the country are fairly poor. Even though UK's distribution of income is more even, due to taxes etc. The top earners in the UK are still earning a large share of national income. No measure of living standards in an economy is perfect, as they all have their problems. The best way of comparing living standards between UK and Iraq is to use all the data and more to give the most accurate and fair comparison. ...read more.

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