Question

	Current Year	Previous Year	Growth Rate
Real GDP	$8.4 trillion	$8.0 trillion
Population	202 million	200 million
GDP per Capita

1A. Calculate GDP per Capita for the current year and previous year.

1B. What is the annual growth rate of GDP per Capita? How do you find it?

1C. How do real GDP growth and population growth affect GDP per capita growth?

1D. Using your calculated figure in (1B), calculate the amount of GDP per capita (future value) after 18 years.

1E. Using the rule of 72, calculate how many years GDP per capita will be double.
72/growth rate = number of years to double the actual value

Answer 1

1A. GDP per Capita for current year= Real GDP/population = 8400000000/202000000 = 41.58 dollars

GDP per Capita for previous year= Real GDP/population= 8000000000/200000000 = 40 dollars

1B. Annual growth rate of GDP per capita= (Current year GDP per capita- Previous year GDP per capita)/(Previous year GDP per capita)*100

= 1.58/40*100= 3.95%

1C. Real GDP and population growth both have an impact on the per capita GDP. Now, if the population grows at a rate higher than that of Real GDP, in that case, the per capita GDP will fall for that economy. On the other hand, when the population grows at a slower rate than the Real GDP, in that case, the Per Capita GDP will rise for that economy. But, if both, the population as well as the real GDP both rise at the same rate, the Per Capita GDP will remain constant.

1D. GDP per capita after 18 years= (Current GDP per Capita)*(1+GDP per Capita Growth Rate)¹⁸

= 41.58*1.0395¹⁸ = 83.51 dollars

1E. Number of Years in which the GDP per Capita will double= 72/3.95 = 18.23 years

Therefore the GDP per capita will double in 18 years approximately.

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