During a federal election campaign, the incumbent argues that he should be re-elected because GDP grew by 12 percent during his 4-year term in office. You know that population grew by 4 percent over the period, and that the GDP deflator increased by 6 percent during the past 4 years. What can you conclude about real GDP per person?

Question

Quizplus · Accepted Answer

Real GDP per person is calculated by dividing GDP by the population and adjusting for inflation using the GDP deflator. Therefore, real GDP per person = (GDP / population) / (GDP deflator / 100). Using the given information, we can calculate that real GDP per person grew by (12% – 6% – 4%) = 2% over the four-year period. Thus, it grew, but by less than 12 percent.

During a Federal Election Campaign, the Incumbent Argues That He