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If the real GDP index rises from 120 to 126 and the population index rises from 100 to 108, what is the direction of real output per person?

Answer and explanation

Correct answer: It will fall

Real output per person equals the real GDP index divided by the population index. Initially the ratio is 120/100 = 1.20; later it is 126/108, approximately 1.167. Equivalently, real GDP rises by 5% while population rises by 8%, so population grows faster than output. Therefore real output per person falls, making option B correct. It neither stays unchanged nor doubles.

Related tags

Index-NumbersPer-Capita-OutputPopulationGdp And WelfareNational Income And Related AggregatesEconomicsClass 11 Mcq

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