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.
Frequently asked questions
What is the correct answer to this question?
It will fall
Why is this the correct answer?
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.
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.
