The income per capita of Country 1 in a certain year was 1,800 in its own currency while that of Country 2 was 32,000 in its own currency

Question

i) If 1 unit of Country 1's currency is worth 6.

5 units of Country 2's currency, which country has a higher income per capita?
ii) Which country is likely to have a higher Human Development Index and why?

Answer 1

i) In order to compare which country has a higher income per capita, we have converted Country 1's income per capita into Country 2's currency. 1 unit of Country 1's currency is worth 6.5 units of Country 2's currency. Therefore, Country 1 has an income per capita of in Country 2's currency. Therefore, Country 2 has a higher income per capita.
ii) The United Nations' Human Development Index is a composite index which combines income per capita, life expectancy, and measures of education to more holistically measure the standard of living. There is a strong association between income per capita and this measure of the standard of living. A country with a higher income per capita is likely to have a higher Human Development Index. Therefore, Country 2 is likely to have a higher Human Development Index.