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A country's total GDP rises by 20%, but its population rises by 25%. What can be said about per capita GDP?

Answer and explanation

Correct answer: It is likely to fall

Per capita GDP is calculated as total GDP divided by population. If GDP increases by 20% while population increases by 25%, the denominator grows faster than the numerator. For example, 100 units of GDP shared by 100 people becomes 120 units shared by 125 people, or 0.96 per person compared with 1 initially. Thus per capita GDP falls, so option B is correct. It does not double and is not independent of population.

Related tags

Population GrowthPer Capita GdpGdp And WelfareNational Income And Related AggregatesEconomicsClass 11 Mcq

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