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%
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
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 poor countries like Ghana.
Real GDP per capita as a map