In an economy real GDP rises from 500 to 550 while population rises from 100 to 115. What happens to real GDP per capita?
Answer and explanation
Correct answer: It falls
Real GDP per capita is calculated as real GDP divided by population. Initially it is 500 ÷ 100 = 5. In the later period it is 550 ÷ 115 ≈ 4.78. Although total real GDP increased by 10%, population increased by 15%, so output per person declined. Therefore option B is correct; total GDP growth alone does not guarantee higher per-capita output.
Frequently asked questions
What is the correct answer to this question?
It falls
Why is this the correct answer?
Real GDP per capita is calculated as real GDP divided by population. Initially it is 500 ÷ 100 = 5. In the later period it is 550 ÷ 115 ≈ 4.78. Although total real GDP increased by 10%, population increased by 15%, so output per person declined. Therefore option B is correct; total GDP growth alone does not guarantee higher per-capita output.
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.
