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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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the formula for calculating change in real gdp is the following
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
… 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%

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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

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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
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!!!
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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
slide8
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

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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%

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