If real GDP rises from two hundred billion to two hundred ten billion while population rises from one hundred million to one hundred ten million, what happens to real output per capita?
Answer and explanation
Correct answer: It will fall because population growth exceeds output growth
Real output per capita equals real GDP divided by population. Initially it is 200 billion divided by 100 million, or 2,000 units per person. Finally it is 210 billion divided by 110 million, about 1,909 units per person. Although total real GDP rises by 5%, population rises by 10%, so output per person falls. Hence option B is correct.
Frequently asked questions
What is the correct answer to this question?
It will fall because population growth exceeds output growth
Why is this the correct answer?
Real output per capita equals real GDP divided by population. Initially it is 200 billion divided by 100 million, or 2,000 units per person. Finally it is 210 billion divided by 110 million, about 1,909 units per person. Although total real GDP rises by 5%, population rises by 10%, so output per person falls. Hence option B is correct.
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.
