Strengths of using GDP per capita:

• Easy to measure and compare: GDP per capita is a readily available statistic that allows for straightforward comparisons between countries.
• Indicates average income: It provides a reasonable indication of the average income and standard of living within a country.
• Reflects economic output: GDP per capita is a measure of the total value of goods and services produced in a country, reflecting overall economic activity.

Weaknesses of using GDP per capita:

• Doesn't reflect income distribution: GDP per capita is an average and doesn't reveal how income is distributed within a country. A high GDP per capita can mask significant inequality.
• Ignores non-market activities: It doesn't account for unpaid work such as household chores or subsistence farming, which can be significant in some developing countries.
• Doesn't measure environmental sustainability: High GDP per capita can be achieved at the expense of environmental damage, which isn't reflected in the metric.
• Doesn't capture quality of life: GDP per capita doesn't fully capture aspects of quality of life such as health, education, or happiness.
• Can be skewed by exchange rates: Fluctuations in exchange rates can distort comparisons between countries.

Conclusion: While GDP per capita is a useful indicator, it's an incomplete measure of a country's level of development. A more holistic approach would consider a range of indicators, including human development indices (HDI), environmental factors, and social well-being.

The classification of economies by national income level provides a framework for understanding their stage of economic development. The three main categories are less developed, developing, and highly developed economies. Each exhibits distinct characteristics across several key dimensions.

Less Developed Economies (LDEs) are typically characterized by:

• Low National Income: Per capita income is low, often below $1,000 per year. This reflects limited productivity and output.
• Primary Sector Dominance: The economy is heavily reliant on agriculture, mining, and fishing. This sector employs a large proportion of the workforce but often has low productivity.
• Low Levels of Industrialisation: Manufacturing is limited, and there's a lack of developed infrastructure.
• Poor Infrastructure: Inadequate transportation, communication, and energy networks hinder economic growth.
• High Levels of Poverty and Inequality: A significant portion of the population lives below the poverty line, and income inequality is often pronounced.
• Low Human Development Index (HDI): Indicators such as life expectancy, education levels, and income are all low.

Developing Economies are in the process of transitioning from LDE status. They show signs of economic growth but still face significant challenges:

• Rising National Income: Per capita income is increasing, but still relatively low (typically between \$1,000 and \$4,000).
• Shift Towards Secondary Sector: Manufacturing is growing, although the primary sector remains important.
• Developing Infrastructure: Investment in infrastructure is increasing, but it's often insufficient to meet the growing demand.
• Urbanisation: People are migrating from rural areas to cities in search of work and better opportunities.
• Improving Human Development: Improvements in health, education, and income are leading to a higher HDI.
• Vulnerability to External Shocks: Developing economies are often susceptible to economic crises and fluctuations in global markets.

Highly Developed Economies (HDEs) are characterized by:

• High National Income: Per capita income is high, typically above $30,000.
• Dominance of Tertiary Sector: Services (finance, healthcare, education, tourism) account for a large proportion of the economy.
• Advanced Manufacturing: High levels of technological innovation and sophisticated manufacturing industries.
• Well-Developed Infrastructure: Excellent transportation, communication, and energy networks.
• Low Levels of Poverty and Inequality: A strong social safety net and progressive taxation policies help to reduce poverty and inequality.
• High Human Development: High life expectancy, high levels of education, and high income contribute to a high HDI.

It's important to note that these are broad categorizations, and there can be significant variation within each category. Furthermore, some economies may exhibit characteristics of more than one category simultaneously. The classification is a useful tool for understanding the different stages of economic development and the challenges and opportunities associated with each stage.

Answer: Gross National Income (GNI) represents the total income earned by a country's residents, regardless of where the income is earned. While GNI is a useful measure of a country's economic activity, it has several limitations as an indicator of living standards. It doesn't fully capture the well-being of a population and can be misleading if not interpreted carefully.

Limitations of GNI as an Indicator of Living Standards:

• Doesn't Reflect Income Distribution: GNI is an aggregate measure and doesn't tell us how income is distributed within a country. A high GNI can mask significant income inequality, where a large portion of the population experiences low living standards.
• Ignores Non-Market Activities: GNI doesn't account for unpaid work, such as household chores, childcare, or volunteer work, which contribute significantly to well-being.
• Doesn't Account for Environmental Costs: GNI growth can come at the expense of environmental quality, which negatively impacts living standards in the long run. It doesn't factor in the cost of pollution or resource depletion.
• Doesn't Capture Subjective Well-being: GNI doesn't capture subjective measures of happiness, life satisfaction, or overall well-being. A high GNI doesn't necessarily mean people are happier.
• Capital Inflows and Outflows: GNI includes income earned by a country's residents abroad and income received by foreign residents within the country. This can distort the picture of domestic well-being.

Adjustments to Better Reflect Well-being:

• GNI per capita adjusted for inequality: Calculate GNI per capita and then adjust it to account for income inequality. This could involve using measures like the Gini coefficient to penalize countries with high levels of inequality. For example, a weighted average of GNI per capita, where the weights are based on the Gini coefficient, could be used.
• Include measures of non-market activity: Add the value of unpaid work, such as household chores and childcare, to GNI. This would provide a more comprehensive measure of economic activity.
• Account for environmental costs: Incorporate the cost of environmental damage, such as pollution and resource depletion, into the GNI calculation. This could involve using environmental accounting techniques.
• Use alternative measures of well-being: Supplement GNI with other measures of well-being, such as the Human Development Index (HDI), which combines measures of health, education, and income. The Genuine Progress Indicator (GPI) is another example that attempts to account for social and environmental costs.

Conclusion: While GNI is a useful indicator of economic activity, it has significant limitations as a measure of living standards. Adjustments to account for inequality, non-market activity, and environmental costs can provide a more accurate picture of well-being. However, it's important to recognize that no single measure can fully capture the complexity of human well-being.