ACCA Applied Knowledge · Business and Technology · Macroeconomic factors
A country's real GDP grew by 3% in a year in which its population grew by 4%. Which statement is most accurate?
Real GDP per head fell by roughly 1%, because population grew faster than output. Total real GDP still grew by 3%, so growth was positive, but average output per person, a common proxy for living standards, probably declined.
- AReal GDP per head fell, so average living standards measured by output per person probably declinedCorrect
- BReal GDP per head rose, because total output grew
- CEconomic growth was negative because population grew faster than output
- DLiving standards must have risen because real GDP increased
Explanation
Output grew 3% but was shared among 4% more people, so real GDP per head fell by roughly 1%. Economic growth as measured by total real GDP was still positive at 3%, so the claim of negative growth is wrong. Rising total GDP does not guarantee higher output per person.
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