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Real GDP grows by five percent and population grows by eight percent. What approximately happens to real GDP per capita?

Answer and explanation

Correct answer: It will fall by about three percent

Real GDP per capita equals real GDP divided by population. For relatively small percentage changes, its growth is approximately the growth of real GDP minus population growth: 5% − 8% = −3%. The exact ratio is 1.05 divided by 1.08, which is about 0.972, or a decline of nearly 2.8%. Therefore, the closest and most appropriate answer is an approximately 3% fall.

Related tags

Real-GdpPer-CapitaPopulation-GrowthWelfareGdp And WelfareNational Income And Related AggregatesEconomicsClass 11 Mcq

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