In a given year, a country recorded a Nominal Gross Domestic Product (GDP) of \500\text{ b… — JAMB UTME

In a given year, a country recorded a Nominal Gross Domestic Product (GDP) of $\$500\text{ billion}$ . The GDP deflator for the year was $125$ (with a base year index of $100$ ), and the total population was $50\text{ million}$ . What was the Real Per Capita Income of the country in dollars?

Answer: 8000 dollars

Answer

The Real Per Capita Income of the country is $8,000.

To compute the Real Per Capita Income, Nominal GDP is first converted to Real GDP using the GDP deflator:

\frac{\$500\text{ billion}}{125} \times 100 = \$400\text{ billion}

. Dividing this real income figure by the population of

50\text{ million}

gives an average real per capita income of

\$8,000

Step-by-Step Solution

Deflate Nominal GDP to obtain Real GDP

Real GDP = $400 billion

Real GDP removes the inflationary effect measured by the GDP deflator.

Divide Real GDP by the population size

Real Per Capita Income = $8,000

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

Key Concept

Real GDP and Per Capita Income Derivation

Estimated Time:1m 30s

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