Short Answer 
The per capita GDP measures the average economic output per person by dividing a country’s total goods produced by its population, indicating living standards. GDP, or Gross Domestic Product, reflects the total value of goods and services produced and serves as a key indicator of economic health, informing policymakers about economic activity and growth strategies.
Step 1: Understand Per Capita GDP
The per capita GDP is calculated by taking the total quantity of goods produced in a country and dividing it by the number of citizens. This measurement gives an average economic output per person, which provides insight into the standard of living and economic health of a nation. A higher per capita GDP typically suggests a wealthier population.
Step 2: Know the Definition of GDP
GDP, or Gross Domestic Product, represents the total value of all goods and services produced within a country’s borders over a specified time period. It acts as a comprehensive measure of a nation’s overall economic activity and performance. Understanding GDP is crucial for assessing the economic strength of a country.
Step 3: Importance of GDP in Economics
GDP serves as a vital indicator of economic health, often referred to as the thermometer of the economy. Here are a few key points regarding its significance:
- A higher GDP indicates increased economic activity.
- It reflects the consumption, sales, and investments in the economy.
- Policymakers and economists use GDP to guide decisions and strategies for growth.