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.
Frequently asked questions
What is the correct answer to this question?
It is likely to fall
Why is this the correct answer?
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.
Which subject and chapter does this question cover?
This is a Class 11 Economics question. Chapter: National Income and Related Aggregates. Topic: GDP and Welfare.
