Learning Path
Question & Answer1
Understand Question2
Review Options3
Learn Explanation4
Explore TopicChoose the Best Answer
A
Real GDP per capita will increase, indicating improved living standards.
B
Real GDP per capita will decrease, suggesting worsening economic conditions.
C
Real GDP per capita might remain the same if the rise in nominal GDP matches the inflation rate.
D
Real GDP per capita will increase without consideration of inflation changes.
Understanding the Answer
Let's break down why this is correct
Answer
When a country sees a large increase in nominal GDP, it means the total value of all goods and services produced is rising. However, if the population stays the same and inflation is also increasing, the real GDP per capita may not improve much, or it could even decline. Real GDP per capita is calculated by adjusting nominal GDP for inflation and dividing by the population. For example, if nominal GDP increases from $1 trillion to $1. 2 trillion but inflation rises by 10%, the real GDP might only increase slightly.
Detailed Explanation
Real GDP per capita might stay the same if the increase in nominal GDP is equal to the inflation rate. Other options are incorrect because This answer suggests that higher nominal GDP always means better living standards; This option assumes that an increase in nominal GDP always leads to worse conditions.
Key Concepts
Real GDP per Capita
Nominal GDP and Inflation
Economic Productivity
Topic
Calculating Real GDP per Capita
Difficulty
medium level question
Cognitive Level
understand
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