Real GDP Per Capita

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

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

GDP-per-head-v-GDP

  • 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

gdp-per-capita-ppp-2011

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

Countries_by_GDP_(PPP)_Per_Capita_in_2015

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4 thoughts on “Real GDP Per Capita

    1. Thanks for comment. I’ll look into it. I definitely remember former AQA multiple choice, where that method did work.

  1. 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

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