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If real GDP remains unchanged while population rises by 4 percent then what happens to real GDP per capita?

Answer and explanation

Correct answer: It will fall by about 3.8 percent

Real GDP per capita equals real GDP divided by population. If GDP stays at the same level while population becomes 1.04 times its original size, per-capita GDP becomes 1 ÷ 1.04 = 0.9615 of its former level. The decline is therefore about 3.85 percent, usually stated as 3.8 percent. It is not a 4 percent exact fall because the denominator changes multiplicatively.

Related tags

Per-Capita GdpPopulation GrowthReal GdpRatio CalculationGdp And WelfareNational Income And Related AggregatesEconomicsClass 11 Mcq

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