In a hypothetical economy, the rate of growth of nominal GDP is 15% per annum, the annual rate of…
Using the standard macroeconomic growth rate relation: (1) Annual rate of growth of Real GDP = Rate of growth of Nominal GDP − Rate of growth of GDP Deflator = 15% − 5% =…
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In a hypothetical economy, the rate of growth of nominal GDP is 15% per annum, the annual rate of growth of GDP deflator is 5%. If the population is growing at the rate of growth of 2% per annum, what will be the annual rate of growth of per capita real GDP?
Answer and explanation
Correct answer A
Using the standard macroeconomic growth rate relation: (1) Annual rate of growth of Real GDP = Rate of growth of Nominal GDP − Rate of growth of GDP Deflator = 15% − 5% = 10%. (2) Annual rate of growth of Per Capita Real GDP = Rate of growth of Real GDP − Rate of growth of Population = 10% − 2% = 8%. Therefore, (8%) is the standard answer.
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UGC NET Economics