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February 10th, 2019, 09:47 AM   #1
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Macro-economics

Hello

Can you help me please about the next exercise:

The nominal GDP of the economy has increased by 16% in the last decade, the population has increased by 11%, and the price index has increased by 3%.
What is the value of real GDP per capita?

I just know that real GDP (not per capita) is 1.16/1.03, but it's my first (or second, I'm not sure) question about real GDP per capita and increasing of population, so I don't really know how to solve this.

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February 10th, 2019, 10:31 AM   #2
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Hi Ilan

The question is not well posed. (I know you probably translated it so that is not surprising, but it means I am not 100% sure that I can answer your question exactly.)

Suppose the nominal gdp, real gdp, population, and real gdp per capita are each indexed at 100 as of a decade ago.

Thus, if I understand the question, the index for nominal gdp now stands at 116 and the price index currently stands at 103. That implies that real gdp has an index of

$\dfrac{116}{103} * 100 \approx 112.62$

The population index is currently 111.

So the index of real gdp per capita is

$\dfrac{100 * \dfrac{116}{103}}{111} * 100 \approx 101.46.$

Now that is plausible and can be checked mentally as follows.

116 relative to 100 is a 16% increase. 103 relative to 100 is a 3% increase.
So real gdp increased about 13%. Population increased by 11%. So population per capita increased about 2%.
Thanks from IlanSherer
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February 10th, 2019, 11:19 AM   #3
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Quote:
Originally Posted by JeffM1 View Post
Hi Ilan

The question is not well posed. (I know you probably translated it so that is not surprising, but it means I am not 100% sure that I can answer your question exactly.)

Suppose the nominal gdp, real gdp, population, and real gdp per capita are each indexed at 100 as of a decade ago.

Thus, if I understand the question, the index for nominal gdp now stands at 116 and the price index currently stands at 103. That implies that real gdp has an index of

$\dfrac{116}{103} * 100 \approx 112.62$

The population index is currently 111.

So the index of real gdp per capita is

$\dfrac{100 * \dfrac{116}{103}}{111} * 100 \approx 101.46.$

Now that is plausible and can be checked mentally as follows.

116 relative to 100 is a 16% increase. 103 relative to 100 is a 3% increase.
So real gdp increased about 13%. Population increased by 11%. So population per capita increased about 2%.
I'm very sorry , there were some English words which I didn't know/remember. I would explain to you, but you already answered my question, so thanks a lot!

Last edited by skipjack; February 10th, 2019 at 11:23 AM.
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