Course: European Business Environment

Professor: Dr. Sziebig Orsolya Johanna

& Dr. Tabajdi Gabriella

Name: Siekleng SAM

Username: U2XGQA

Homework 2:

Based on the lecture and/or other possible sources, please answer the following questions:

1. Why is GDP per capita in PPS a better tool for country comparisons than nominal
GDP per capita?

➢ GDP per capita in PPS a better tool for country comparisons than nominal GDP per capita
because GDP per capita in PPS is more accurate than nominal GDP per capita. GDP per
capita in PPS is reflecting to the actual level the standard of living in a nation. It enables a
more accurate comparison of economic prosperity between nations. By taking into
consideration the costs of products and services, it enables us to compare the purchasing
power of people in other nations. It is really important when it comes to the price of a
basket of goods and services that people consume, providing a more accurate reflection of
the actual purchasing power of individuals.
➢ Other reason, GDP per capita in PPS enable to have better understand about how the
resource are being allocated. It helps the economist see how improvement and well-being
of a country.
➢ In contrast, the nominal GDP per capita does not account for variations in the cost of
products and services; instead, it divides the total economic output by the population.
That’s why it is not accurate.

2. How does COVID-19 impact EU GDP (growth rate, /capita)? Were there any outliers
among the member states (MSs) with respect to these indicators?

➢ COVID-19 has been caused to a huge impact on EU GDP, especially in tourism,

manufacturing, and service. According to CEPR in 2021, has shown that “The COVID-19
pandemic resulted in an unprecedented economic contraction in 2020, with EU real GDP
falling by 6.1%, more than during the global financial crisis.” (CEPR, 2021). First of all,
 public finances have suffered significantly, and fiscal disparity between Member States has
grown. All Member States now have record-high deficit and debt ratios.
➢ Additionally, Businesses had to close, consumer spending decreased, and supply chains
were affected as a result of the member states' adoption of lockdown measures and social
distance limits. As a result, manufacturing dropped, and economic activity shortened.
➢ If we take a look to tourism sector, Travel restrictions had a significant negative impact on
the travel and tourism industries, including hospitality, transportation, and entertainment,
and they decreased both domestic and foreign travel. Significant revenue losses,
employment losses, and business closures in these industries contributed to the slowdown
in GDP growth.
➢ Consequently, it led to negative impact on investment, trade cooperation, supply chain
disruption, and reduced demanding, trade restriction then it effected to the whole GDP of
EU.

There was outliner among member states, while some member states were more severely
affected than others by the drop in GDP growth, others were able to somewhat lessen the effects.
For example, in Greece, Spain, and Italy had been suffering in tourism and hospitality sector,
because these countries GDP growth also based on tourism sector. Another example, some smaller
EU members that mainly rely on financial services, including Luxembourg and Malta, have been
less affected by the epidemic because of their capacity to adopt remote labor and digital services.

3. What is the Human Development Index (HDI) and how European Union countries
are performing regarding it?

❖ According to UNDP, has been giving the definition of Human Development Index (HDI)
that “The Human Development Index (HDI) is a summary measure of average achievement
in key dimensions of human development: a long and healthy life, being knowledgeable
and having a decent standard of living” (UNDP, 2018). It means that in order to measure
the development of the country, should not rely only on GDP of the country but also the
social well being of the country.
❖ For example, the life expectancy, standard of living, quality of education, and standard of
health care system. If we take a look to EU countries, we can see that the Nordic countries
has been performing a very good job in HDI. According to human development country
ranking, the top ranking are mostly the countries in European Union in 2021. For example,
the first rank goes to Denmark with the score 0.948, and then Sweden, Ireland, Germany,
Netherlands, repeatedly (The global economy, 2021).