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Calculating the Rate of Growth of Per Capita Real GDP
The annual rate of growth of real GDP in a developing nation is 0.3 percent. Initially, the countries' population was stable from year to year. Recently, however, a significant increase in the nation's birth rate has raised the annual rate of population growth to 0.5 percent. Answer the following questions:
a.What was the rate of growth of per capita real GDP before the increase in population growth?
b.If the rate of growth of real GDP remains unchanged, what is the new rate of growth of per capita real GDP following the increase in the birthrate?
Think it through. GDP per capita is simply GDP/Pop. Let a be the growth in real GDP, and let b be the growth in the population. Then the growth in per captita real GDP is (a*GDP)/(b*Pop).
Take in from here.