Economic Growth, GDP and GDP Per Capita
What economic growth means and the three measures of output: GDP, real GDP that strips out rising prices, and GDP per capita that divides output by the population to show the average per person.
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Measuring what a country makes
One of the main jobs of a government is to grow the economy. To judge how it is doing, economists measure the total value of everything a country produces. This module covers economic growth and the three measures you need: GDP, real GDP, and GDP per capita, plus the simple sum that turns a total into an amount per person.
Growth vocabulary
Learn these four terms before you study the measures.
Total or per person
Two measures answer very different questions.
Read the measure carefully
A top answer picks the right measure. Real GDP strips out rising prices, so it shows whether output truly grew rather than just costing more. GDP per capita divides by the population, so it shows what each person has on average. A country can have a huge total GDP but a low GDP per capita if its population is very large.
Match the term
- economic growth
- GDP
- real GDP
- GDP per capita
- an increase in the output a country produces
- the total value of everything produced
- output measured after rising prices are removed
- the output shared out per person
Match the measure
- GDP per capita
- real GDP
- GDP
- economic growth
- best for comparing living standards between countries
- best for checking if growth is real or just higher prices
- best for measuring the total size of an economy
- the rise in output from one year to the next
What is per capita?
How do you work out GDP per capita?
- Divide GDP by the population.
- Multiply GDP by the population.
- Take rising prices out of GDP.
- Add last year GDP to this year GDP.
Why growth matters
Select the TWO benefits economic growth can bring.
- More jobs as firms produce more.
- Higher average living standards.
- Fewer goods and services for everyone.
- A smaller total economy.
Order the working
Put the steps of finding GDP per capita in order, earliest first.
- Measure the total output as GDP
- Take out rising prices to get real GDP
- Find the size of the population
- Divide the output by the population
- Use the result to compare living standards
Complete the facts
An increase in total output is economic _____. The total value of what a country produces is its _____. GDP measured after rising prices are removed is _____ GDP. GDP divided by the population is GDP per _____. A country with a very large population may have a low GDP per capita even if its total output is _____.
Work out per capita
A country has a total GDP of 800 and a population of 4. GDP per capita is the total divided by the population. Divide 800 by 4 to find GDP per capita. What is the answer?
Why per capita helps
Tap the TWO reasons GDP per capita is a useful measure.
- it takes account of the size of the population
- it shows the output per person
- it ignores how many people there are
- it is the same thing as real GDP
Choose the measure
Read each question and choose the best measure to use.
- You want to compare average living standards in two countries of very different sizes. Which measure is best?
- Output looks higher this year, but you suspect it is only because prices rose. Which measure settles it?
- You just want to know the total size of a country economy. Which measure is best?
Explain the measures
Explain what economic growth is and how GDP, real GDP and GDP per capita each measure a country output.
- Explain what economic growth means and why it matters
- Explain the difference between GDP and real GDP
- Explain why GDP per capita is a better guide to living standards