Calculating economic growth. The formula for calculating % change in real GDP is the following % change in real GDP = final value of real GDP – initial.

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Presentation transcript:

Calculating economic growth

The formula for calculating % change in real GDP is the following % change in real GDP = final value of real GDP – initial value of real GDP (x100) ÷ initial value of GDP

… For example If an economy had real GDP of… $75.3billion in 2010 …and $81.7billion in 2011 How much did Real GDP grow? 81.7 – 75.3 (x100) ÷ 73.3 = 8.73%

Page 295 Question 4a.) If an economy had real GDP of… $1579 in 2007 $ 1611 in 2008 $1597 in 2009 a.) How much did the economy grow? 1611 – 1579 (x100) ÷ 1579 = 2.03% Growth

Page 295 Question 4b.) If an economy had real GDP of… $1579 in 2007 $ 1611 in 2008 $1597 in 2009 b.) How much did the economy grow? (x100) ÷ 1611 = -0.87% Growth

4C.) When did the economy experience negative growth? The economy experienced negative growth of 0.87% between 2008 and 2009 This means to say that the economy contracted by approximately 1% Recession!!!

Page 295 Question 5 – How is it possible that country can have positive real GDP growth and yes have negative real GDP per capita? it will all depend on how fast the population is growing If real GDP grows faster than population then the per capita GDP level will increase too. However if population increases faster than real GDP then the per capita GDP on average decreases

If we know the % change in real GDP and the percentage change in the population, we can find the % change in Real GDP per capital simply % change in real GDP per capita = % change in real GDP – % change in population

Page 295 Question 6 Suppose that an economy’s real GDP grew by 2.2% in 2007, and it’s population grew by 1.5% during the same year. By how much did its real GDP per capita grow? 2.2% - 1.5% = 0.7%