A decrease in the total value of a country's financial liabilities relative to its national income is a definitive indicator that the country's per capita wealth is also declining.
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An economist is comparing two hypothetical countries and has gathered the following data:
- Country X: Has a GDP per capita of $60,000. The total value of all financial liabilities in the country is equal to 200% of its GDP. 98% of its adult population uses formal financial services.
- Country Y: Has a GDP per capita of $4,000. The total value of all financial liabilities in the country is equal to 35% of its GDP. 25% of its adult population uses formal financial services.
Based on
A decrease in the total value of a country's financial liabilities relative to its national income is a definitive indicator that the country's per capita wealth is also declining.
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Explaining the Link Between Wealth and Financial Systems