If total real GDP rises by six percent and population rises by eight percent what is the likely effect on real output per person?
Answer and explanation
Correct answer: It is likely to fall
Real output per person is calculated as real GDP divided by population. In approximate growth terms, its growth is 6% minus 8%, or about -2%. More exactly, the index changes by 1.06 divided by 1.08, which is approximately 0.9815, indicating a fall of about 1.85%. Thus option D is correct. A is wrong because output did not grow faster than population; B exaggerates the change; and C ignores the denominator’s faster growth.
Frequently asked questions
What is the correct answer to this question?
It is likely to fall
Why is this the correct answer?
Real output per person is calculated as real GDP divided by population. In approximate growth terms, its growth is 6% minus 8%, or about -2%. More exactly, the index changes by 1.06 divided by 1.08, which is approximately 0.9815, indicating a fall of about 1.85%. Thus option D is correct. A is wrong because output did not grow faster than population; B exaggerates the change; and C ignores the denominator’s faster growth.
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.
