# Calculating economic growth - PowerPoint PPT Presentation

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Calculating economic growth. The formula for calculating % change in real GDP is the following. % change in real GDP = final value of real GDP – initial value of real GDP (x100) ÷ initial value of GDP. … For example. If an economy had real GDP of… \$75.3billion in 2010

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Calculating economic growth

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## Calculating economic growth

### The formula for calculating % change in real GDP is the following

% change in real GDP =

final value of real GDP – initial value of real GDP (x100)

÷

initial value of GDP

### … For example

• If an economy had real GDP of…

• \$75.3billion in 2010

• …and \$81.7billion in 2011

• How much did Real GDP grow?

81.7 – 75.3 (x100)

÷

73.3 = 8.73%

### Page 295

Question 4a.)

• If an economy had real GDP of…

• \$1579 in 2007

• \$ 1611 in 2008

• \$1597 in 2009

a.) How much did the economy 2007 -2008 grow?

1611 – 1579 (x100)

÷

1579 = 2.03% Growth

### Page 295

Question 4b.)

• If an economy had real GDP of…

• \$1579 in 2007

• \$ 1611 in 2008

• \$1597 in 2009

b.) How much did the economy 2008 -2009 grow?

1597-1611 (x100)

÷

1611 = -0.87% Growth

### 4C.) When did the economy experience negative growth?

• The economy experienced negative growth of 0.87% between 2008 and 2009

• This means to say that the economy contracted by approximately 1%

• Recession!!!

### Page 295

Question 5 – How is it possible that country can have positive real GDP growth and yes have negative real GDP per capita?

• it will all depend on how fast the population is growing

• If real GDP grows faster than population then the per capita GDP level will increase too.

• However if population increases faster than real GDP then the per capita GDP on average decreases

### If we know the % change in real GDP and the percentage change in the population, we can find the % change in Real GDP per capital simply

% change in real GDP per capita =

% change in real GDP – % change in population

### Page 295

Question 6

Suppose that an economy’s real GDP grew by 2.2% in 2007, and it’s population grew by 1.5% during the same year. By how much did its real GDP per capita grow?

2.2% - 1.5% = 0.7%