If a country's real GDP rises by 8% and population rises by 3%, approximately how much will real output per person increase?
Answer and explanation
Correct answer: About 5%
The governing concept is per-capita real output: real GDP divided by population. For small percentage changes, the approximate growth rate is total real GDP growth minus population growth: 8% − 3% = 5%. The exact ratio gives 1.08/1.03 − 1, or about 4.85%, which rounds to 5%. Therefore option A is correct; adding or ignoring population gives the wrong result.
Frequently asked questions
What is the correct answer to this question?
About 5%
Why is this the correct answer?
The governing concept is per-capita real output: real GDP divided by population. For small percentage changes, the approximate growth rate is total real GDP growth minus population growth: 8% − 3% = 5%. The exact ratio gives 1.08/1.03 − 1, or about 4.85%, which rounds to 5%. Therefore option A is correct; adding or ignoring population gives the wrong result.
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.
