This document defines and provides examples of key terms related to economic growth. It discusses:
- Economic growth is defined as an increase in a country's production of goods and services, and is positively associated with quality of life. It is measured in currency terms.
- Economic growth rate is the percentage change in real GDP from one period to the next.
- GDP per person divides a country's total GDP by its population to compare living standards between countries and over time.
- Population growth rate is the percentage change in a population from one period to the next.
- Examples are provided to demonstrate calculating growth rates of real GDP, population, and real GDP per person.
2. Economic Growth
Economic Growth is an increase in the capacity of an economy to
produce goods and services.
Higher economic growth is positively associated with an
increased quality of life or standard of living.
Measured in currency.
Economic changes can be positive or negative.
3. Economic Growth Rate
An economic growth rate is a measure of economic growth from
one period to another.
It is expressed in percentage.
Formula:
Growth rate = Real GDP in _ Real GDP in
of real GDP current year previous year x 100
Real GDP in previous year
4. Example:
If real GDP in the current year is $8.4 trillion and if real GDP in the previous year was
$8.0 trillion, growth rate of real GDP is:
Growth rate = Real GDP in _ Real GDP in
of real GDP current year previous year x 100
Real GDP in previous year
= $8.4 trillion - $8.4 trillion x 100
$8.0 trillion
= 5%
5. GDP Per Person
GDP Per Person is a measurement of the total economic
output of a country divided by the number of people.
It's used to compare the standard of living between countries
and over time.
= GDP .
Population of the country.
6. Population Growth Rate
Population Growth Rate is the increase in the number of individuals in
a population.
It is expressed in percentage.
Growth of = Pop. In the _ Pop. In the
Population current year previous year x 100
Pop. In the previous year
7. Example 1:
Current year:
In the current year, when real GDP $8.4 trillion, the population is
404 million.
GDP per = $8.4 trillion
person $202 million
= $41, 584
8. Example 1:
Previous year:
In the previous year, when real GDP was $8.0 trillion, the
population was 400 million.
GDP per = $8.0 trillion
person $200 million
= $40, 000
9. Example 1:
Use these two values of real GDP per person in the growth formula to
calculate the growth rate of real GDP per person.
It is:
Growth rate of real = $41,584 - $40,000 x 100
GDP per person $40,000
= 4%
10. Example 2:
The growth rate of real GDP per person can also be calculated by
using the formula:
Growth of real = Growth rate of – Growth rate of
GDP per person real GDP population
11. Example 2:
If real GDP in the current year is $8.4 trillion and if real GDP in the previous year was
$8.0 trillion, growth rate of real GDP is:
Growth rate = Real GDP in _ Real GDP in
of real GDP current year previous year x 100
Real GDP in previous year
= $8.4 trillion - $8.4 trillion x 100
$8.0 trillion
= 5%
12. Example 2:
Current year:
When real GDP was $8.4 trillion, population was 202 million.
Previous year:
When real GDP was $8.0 trillion, population was 200 million.
Growth of = 202 million – 200 million x 100
Population 200 million
= 1 %
13. Example 2:
Growth of real = Growth rate of – Growth rate of
GDP per person real GDP population
Growth of real = 5 % - 1 %
GDP per person
= 4%