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
7 thoughts on “Real GDP Per Capita”
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.
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
Isn’t GNP the measure of national income whereas GDP focuses on the value of the output produced?
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