📚 Learning Guide
Calculating Real GDP per Capita
hard

If a country's nominal GDP increases while its population and inflation rate remain constant, what can we infer about its real GDP per capita?

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Learning Path
Learning Path

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Choose the Best Answer

A

It must have increased.

B

It must have decreased.

C

It remains unchanged.

D

It is irrelevant to GDP growth.

Understanding the Answer

Let's break down why this is correct

Answer

If a country's nominal GDP increases while its population and inflation rate stay the same, we can infer that its real GDP per capita is also increasing. Nominal GDP measures the total value of all goods and services produced in the country at current prices, without adjusting for inflation. Since inflation is constant, the increase in nominal GDP suggests that the economy is producing more goods and services. If the total output is rising and the population is unchanged, it means that, on average, each person in the country has more economic resources or wealth. For example, if a country had a nominal GDP of $1 million with a population of 100,000, its real GDP per capita would increase if the GDP rose to $1.

Detailed Explanation

When nominal GDP goes up and the population stays the same, each person has more money. Other options are incorrect because This option suggests that people have less money, which is not true; This choice implies nothing changes for each person, which is incorrect.

Key Concepts

Real GDP per Capita
Nominal GDP
Inflation Rate
Topic

Calculating Real GDP per Capita

Difficulty

hard level question

Cognitive Level

understand

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