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In an economy real GDP rises from 500 to 550 while population rises from 100 to 115. What happens to real GDP per capita?

Answer and explanation

Correct answer: It falls

Real GDP per capita is calculated as real GDP divided by population. Initially it is 500 ÷ 100 = 5. In the later period it is 550 ÷ 115 ≈ 4.78. Although total real GDP increased by 10%, population increased by 15%, so output per person declined. Therefore option B is correct; total GDP growth alone does not guarantee higher per-capita output.

Related tags

Real Gdp Per CapitaPopulation GrowthOutput Per PersonWelfareGdp And WelfareNational Income And Related AggregatesEconomicsClass 11 Mcq

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