Two economies have the same real GDP but one has half the population. Other things equal which is likely to have the higher average material living standard?
Answer and explanation
Correct answer: The economy with the smaller population
Average material living standard is commonly approximated by real GDP per person. If two economies produce the same real GDP but one has only half as many people, its output divided among each person is higher—roughly twice as high, other things equal. Thus option B is correct. Nominal GDP includes price effects, and equal total GDP does not imply equal per-person availability.
Frequently asked questions
What is the correct answer to this question?
The economy with the smaller population
Why is this the correct answer?
Average material living standard is commonly approximated by real GDP per person. If two economies produce the same real GDP but one has only half as many people, its output divided among each person is higher—roughly twice as high, other things equal. Thus option B is correct. Nominal GDP includes price effects, and equal total GDP does not imply equal per-person availability.
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.
