A country's rate of real GDP growth is 3% per year. Its population is growing 4% per year. At what rate is its real GDP per capita changing?
A) Real GDP per capita is increasing by 0.75%.
B) Real GDP per capita is increasing by 7%.
C) Real GDP per capita is decreasing by 1.33%.
D) Real GDP per capita is decreasing by 1%.

Question

Quizplus · Accepted Answer

Real GDP per capita is calculated by dividing real GDP by population. In this case, if real GDP is growing at 3% and population is growing at 4%, then real GDP per capita is increasing at a rate of 3% - 4% = -1%. This means that real GDP per capita is actually decreasing by 1%. Therefore, the correct answer is D.

A Country's Rate of Real GDP Growth Is 3% Per