Skip to main content

Exercise: GDP growth rate

Exercise:

Assume that country Y has a population of 458 with a constant yearly (population) growth rate of about 2.8%. Find real GDP per capita and the real GDP growth rate for each year from 2015 to 2019. Describe the relationship between the per capita GDP and the GDP growth rate.

YearPopulation Real GDP p.c GDP  GDP growth rate
2015458$23,457...n.a
2016...$23,943......
2017...$24,035.2......
2018...$25,431.1......
2019...$24,950.6......

Solution:

YearPopulation Real GDP p.c GDP  GDP growth rate
2015458$23,457$51.1n.a
2016471$23,943$50.72.06%
2017483$24,035.2$49.80.39%
2018498$25,431.1$51.15.81%
2019510$24,950.6$48.8-1.89%

General formula for constant population growth:


i stands for year (2015, 2016, etc ...). Example:


To find the per capita GDP divide the GDP of year i by its population. Example:


GDP growth rate is simply the percentage change between this year's GDP and the GDP from the previous year (remember the formula in the previous lesson?). Then, the GDP growth rate for the year 2019 is:


Notice that in the year 2019, the economy of country Y is contracting (i.e getting smaller).


Lastly, by looking at the columns for p.c GDP and GDP growth rate, describe what pattern you see.

If the GDP growth rate is smaller (bigger) than the population growth rate, the GDP per capita decreases (increases) compared to the previous year.  

Labels:
Location: New York, NY, USA

Comments

Post a Comment

Popular posts from this blog

Macroeconomics: multiplier and crowding out effects

Multiplier effect: whenever   any of the components of AD increases, the increase in GDP will be greater than the initial increase in expenditures. The impact on GDP of a particular increase in spending depends on the proportion of the new income that is taken out of the system to the proportion that continues to circulate in the economy. The multiplier effect tells us the impact a particular change in one the components of AD will have on the total income (GDP).  Let k denote the spending multiplier, which is a function of MPC and MPS. The larger the marginal propensity to consume, the larger the spending multiplier. Notice that the larger the MPC, the greater the impact a particular change in the spending variables will have on the nation's GDP. The crowding out effect: If government spending increases without an increase in taxes, the government must borrow funds from the private sector to finance its deficit, thereby increasing the interest rate. This increase in interest ...
Post a Comment
Read more

Microeconomics: Factor Markets

Definition: Factor markets: markets for the factors of production (example: labor and capital). Markets are formed whenever consumers and producers meet to exchange goods or services. Deriving factor demand: the demand for goods or services in the product markets creates demand for the factors of production.  An increase (decrease) in demand for good X leads the suppliers to increase their production thereby increasing (decreasing) the demand for the factors of production.   Marginal revenue product: The demand for the factor of production is formed by multiplying a firm's marginal revenue by its marginal product.  Remember that by taking the derivative of the TR function with respect to Q we are able to find the MR. Marginal product on the other hand is found by taking the derivative of the production function with respect to a factor of production (L or K for example). Marginal revenue product (MRP): the change in total revenue when one more input is employed. It decrea...
Post a Comment
Read more

A short interlude...

Hello all, it's been quite some time since I have made any major announcements since the creation of this blog about a year and a half ago. I am currently in graduate school and will soon take a portion of my comprehensive examination (i.e exams in Micro, Macro, and Metrics that will allow me to continue my studies in my graduate program), wish me luck! Thus, I will not be able to post consistently until at least mid-June. The roadmap is as such, if I pass, I will start introductory lessons in Econometrics and Statistics (if not, then I'll have to study until I can retake the comps in August). I hope that once I am done, I will be able to add more advance materials to the blog, such as general equilibrium, indirect utility functions, and game theory/mechanism design for Micro. The Solow, Ramsey, RBC, New Keynesian models, permanent income hypothesis (PIH) and more for Macro. By the way I think I still need to add notes on the IS-LM curves, so I will do that before jumping to t...
Post a Comment
Read more