An opinion column by Steven Ratner in the New York Times observed, As recently as 1990, the
Question:
An opinion column by Steven Ratner in the New York Times observed, “As recently as 1990, the economies of China and India were roughly the same size. Today, India’s gross domestic product per person ($2,000) is a fraction of China’s ($8,800).” Rattner is quoting nominal GDP per capita values (converted from domestic currency to U.S. dollars). In constant 2011 prices, China’s real GDP per capita was $15,309, and India’s was $6,514.
a. What must be true about relative inflation rates in the two countries for there to be such a large difference between the relative nominal and real GDP per capita values for the two countries?
b. Rattner argues, “Even a sparkling growth rate isn’t enough to lift the standard of living in India close to that of China.” What must he be assuming for this conclusion to be correct?
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