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A country's real GDP grows by 4% while its population grows by 6%. What is the likely effect on output per person?

Answer and explanation

Correct answer: About a 2% decrease

Output per person is calculated as real GDP divided by population. With the approximate growth rule, per-capita growth is 4% − 6% = −2%, so real output per person falls by about 2%; option C is correct. The exact ratio is 1.04/1.06 − 1, approximately −1.9%, which leads to the same conclusion. A reverses the difference, B adds the rates, and D ignores population growth.

Related tags

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

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