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Calculating economic growth

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

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Calculating economic growth

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  1. Calculating economic growth

  2. 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

  3. … 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%

  4. 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 2007 -2008 grow? 1611 – 1579 (x100) ÷ 1579 = 2.03% Growth

  5. 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 2008 -2009 grow? 1597-1611 (x100) ÷ 1611 = -0.87% Growth

  6. 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!!!

  7. 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

  8. 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

  9. 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%

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