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?
a. To calculate the rate of growth of per capita real GDP before the increase in population growth, we need to subtract the rate of population growth from the rate of real GDP growth.
Rate of growth of per capita real GDP = Rate of growth of real GDP - Rate of population growth
Rate of growth of per capita real GDP = 0.3% - 0% (as the population was initially stable)
Therefore, the rate of growth of per capita real GDP before the increase in population growth was 0.3%.
b. If the rate of growth of real GDP remains unchanged, we need to recalculate the rate of growth of per capita real GDP with the new population growth rate.
Rate of growth of per capita real GDP = Rate of growth of real GDP - Rate of population growth
Rate of growth of per capita real GDP = 0.3% - 0.5% (new population growth rate)
Therefore, the new rate of growth of per capita real GDP following the increase in the birth rate is -0.2% (a decrease of 0.2%).
a. To calculate the rate of growth of per capita real GDP before the increase in population growth, we need to use the formula:
Rate of Growth of Per Capita Real GDP = Rate of Growth of Real GDP - Rate of Population Growth
Given that the rate of growth of real GDP is 0.3 percent and the initial rate of population growth was 0 percent (as the population was stable), we can substitute these values into the formula:
Rate of Growth of Per Capita Real GDP = 0.3% - 0% = 0.3%
Therefore, the rate of growth of per capita real GDP before the increase in population growth was 0.3 percent.
b. To calculate the new rate of growth of per capita real GDP following the increase in the birth rate, we again use the formula:
Rate of Growth of Per Capita Real GDP = Rate of Growth of Real GDP - Rate of Population Growth
Given that the rate of growth of real GDP remains unchanged at 0.3 percent, but the new rate of population growth is 0.5 percent, we can substitute these values into the formula:
Rate of Growth of Per Capita Real GDP = 0.3% - 0.5% = -0.2%
Therefore, the new rate of growth of per capita real GDP following the increase in the birth rate is -0.2 percent. This means that the per capita real GDP is now decreasing.
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.