Definition Real GDP per Capita measures the average level of national income (adjusted for inflation) per person. It gives a rough indication of average living standards.
- GDP (Gross Domestic Product) measures the national output/national income of an economy; this is a measure of the volume of goods and services produced in a given year.
- Real GDP takes into account inflation. In other words, Real GDP measures the actual increase in goods and services and excludes the impact of rising prices.
- Real GDP per capita takes into account the average GDP per person in the economy.
Example of real GDP per capita
Between 2000 and 2001
- Nominal GDP has increased 7%.
- With inflation of 2%, real GDP has increased 7-2 = 5%
- With population growth of 1%, real GDP per capita has increased by 4%
See also:
This gives different answer.
Importance of GDP per capita
- This shows the difference between real GDP and real GDP per capita in the UK between 2005 and 2015.
- Due to population growth, the increase in per capita GDP is significantly less than standard real GDP.
- Therefore, although real GDP increased, average incomes didn’t. See: economic growth per capita
This shows the difference between real GDP and real GDP per capita since 2006. The UK had significant population growth during this period, so real per capita growth is much lower.
Comparisons of GDP per capita around the world
This is a measure of real GDP per capita using purchasing power parity (it takes into account local cost of living). Even with PPP, there is a big difference between rich countries like Norway and Bulgaria.
See also: Real GDP per capita
Real GDP per capita as a map
Related
- GDP Per Capita Statistics
- Richest Countries by GDP
- Measuring Living Standards – limitations of GDP
About The Author
My apologies I have misread the information provided
I too read in the same way you mentioned above. Can you clarify about your understanding of the statement
Isn’t GNP the measure of national income whereas GDP focuses on the value of the output produced?
my neither – i have emailed AQA and received a very complicated response. Econplusdal promises he is going to explain it in his live feed tonight at 7.15! (14th June!)
email me directly and i will forward you the AQA response
I am an economics teacher and have always used the method you suggested above to calculate the real GDP per capita, but in the AQA sample paper 1 2014 it does not work. http://filestore.aqa.org.uk/resources/economics/AQA-71363-SQP.PDF
The answer is 10% (actually closer to 11%)
Thanks for comment. I’ll look into it. I definitely remember former AQA multiple choice, where that method did work.