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If a country's real GDP rises by 8% and population rises by 3%, approximately how much will real output per person increase?

Answer and explanation

Correct answer: About 5%

The governing concept is per-capita real output: real GDP divided by population. For small percentage changes, the approximate growth rate is total real GDP growth minus population growth: 8% − 3% = 5%. The exact ratio gives 1.08/1.03 − 1, or about 4.85%, which rounds to 5%. Therefore option A is correct; adding or ignoring population gives the wrong result.

Related tags

Real GdpPopulation GrowthPer Capita OutputNumericalGdp And WelfareNational Income And Related AggregatesEconomicsClass 11 Mcq

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