per capita income

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per capita income

the income per head of the population of a country. This is a usual way of distinguishing between the relative WEALTH of countries, although there exist many problems in using it. Not least of the problems is the continued existence of ‘subsistence’ economic activity and a widespread INFORMAL ECONOMY in many societies. This means that much economic activity goes unrecorded. A further difficulty is that exchange rates (the basis of per capita calculations of differences in income) between different currencies often fail to reflect internal differences in the purchasing power of different currencies. Thus, while useful in establishing broad differences between nations, the notion of per capital income should be used with caution in making more detailed comparisons.