During a federal election campaign, the incumbent argues that he should be re-elected because GDP grew by 12 percent during his four-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 four years. What can you conclude about real GDP per person?

Question

Quizplus · Accepted Answer

Real GDP per person is calculated by dividing GDP by population, adjusting for inflation (using the GDP deflator). Therefore, real GDP per person growth rate can be calculated as follows:

Real GDP per person growth rate = (1 + GDP growth rate - GDP deflator growth rate) / (1 + population growth rate)

Using the information given in the question:

Real GDP per person growth rate = (1 + 0.12 - 0.06) / (1 + 0.04) = 1.05

This means that real GDP per person grew by 5 percent over the past four years, which is less than the reported GDP growth rate of 12 percent. Therefore, the correct answer is B.

During a Federal Election Campaign, the Incumbent Argues That He