Which of the following countries has the largest economy?
a.
china
b.
japan
c.
south korea
d.
north korea

C)

Explanation

First, the GDP of a country is measured in its own currency—the United States uses the US dollar; most countries of Western Europe use the euro; Japan uses the yen; and Mexico uses the peso. Because of this, comparing GDP between two countries requires converting to a common currency.

A second issue is that countries have very different numbers of people. For instance, the United States has a much larger economy than Mexico or Canada, but it also has roughly three times as many people as Mexico and nine times as many people as Canada. So, if we are trying to compare standards of living across countries, we need to divide GDP by population.