If a country's real GDP is rising by 3% per year while its population is rising at 5% per year, which of the following is true?
A)The country's standard of living is falling.
B)The country's standard of living is rising.
C)Growth in nominal GDP outweighs growth in the population.
D)Growth in nominal GDP is less than the growth in the population.
E)Nominal GDP per capita must be constant.

Question

Quizplus · Accepted Answer

Real GDP measures the value of goods and services produced in a country adjusted for inflation, while population growth reflects the increasing number of people in the country. Since the population growth rate is higher than the real GDP growth rate, it means that the increase in output is not keeping up with the rise in population. As a result, the country's standard of living (measured by the real GDP per capita) must be falling, meaning that the average person is becoming poorer. Therefore, option A is the correct answer.

If a Country's Real GDP Is Rising by 3% Per