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Calculating economic growth

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Calculating economic growth

% change in real GDP =

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

÷

initial value of GDP

- 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%

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

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

- The economy experienced negative growth of 0.87% between 2008 and 2009
- This means to say that the economy contracted by approximately 1%
- Recession!!!

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

% change in real GDP per capita =

% change in real GDP – % change in population

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%