In Year 1, a country recorded a base price index of 100. By Year 5, the country's Nominal … — JAMB UTME

In Year 1, a country recorded a base price index of $100$ . By Year 5, the country's Nominal Gross Domestic Product (GDP) reached $\text{₦}900\text{ billion}$ , and its GDP deflator rose to $150$ . If the total population in Year 5 stood at $40\text{ million}$ , what is the nation's Real Per Capita Income for Year 5 in Naira?

Answer: 15000 Naira

Answer

The Real Per Capita Income for Year 5 is ₦15,000.

To accurately measure economic output and living standards, Nominal GDP must first be deflated to obtain Real GDP (

\text{Real GDP} = \frac{\text{Nominal GDP}}{\text{GDP Deflator}} \times 100 = \text{₦}600\text{ billion}

). Dividing Real GDP by the population of

40\text{ million}

yields a Real Per Capita Income of

\text{₦}15,000

Step-by-Step Solution

Adjust Nominal GDP for inflation to determine Real GDP.

Real GDP = (₦900 billion / 150) * 100 = ₦600 billion.

Nominal GDP measures output at current market prices, whereas Real GDP adjusts for price level changes using the GDP deflator.

Divide Real GDP by the total population in Year 5.

Real Per Capita Income = ₦600 billion / 40 million = ₦15,000.

Per capita real income measures the average real economic output available per person.

Key Concept

Calculation of Real GDP using the GDP Deflator and derivation of Real Per Capita Income.

Estimated Time:1m 30s

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