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If total real GDP rises by six percent and population rises by eight percent what is the likely effect on real output per person?

Answer and explanation

Correct answer: It is likely to fall

Real output per person is calculated as real GDP divided by population. In approximate growth terms, its growth is 6% minus 8%, or about -2%. More exactly, the index changes by 1.06 divided by 1.08, which is approximately 0.9815, indicating a fall of about 1.85%. Thus option D is correct. A is wrong because output did not grow faster than population; B exaggerates the change; and C ignores the denominator’s faster growth.

Related tags

Real GdpPopulation GrowthPer Capita OutputStandard Of LivingGdp And WelfareNational Income And Related AggregatesEconomicsClass 11 Mcq

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