Growth, GDP and living standards
| English | Español |
|---|---|
| real GDP/rɪəl ˌdʒiː diː ˈpiː/ | real GDP |
| GDP per person/ˌdʒiː diː ˈpiː pɜː ˈpɜːsn/ | GDP per person |
A decision you can investigate
- A town produces more goods, but its population also grows and its river becomes dirtier.
- More output does not tell us everything about how residents live.
Build the explanation
- GDP measures the value of final goods and services produced within an economy during a period. Real GDP 实际国内生产总值 removes the effect of price changes; economic growth is an increase in real output.
- GDP per person 人均国内生产总值 divides output by population. Neither measure reveals income distribution, unpaid work, leisure, health or environmental damage. A country can grow while some households remain poor.
Work through the evidence
- Fictional real GDP rises from 100 million to 105 million: growth = (105−100)/100 × 100 = 5%. Population rises from 10000 to 10500. Real GDP per person stays 10000, since 105000000/10500 = 10000.
- More production may create jobs and reduce poverty if incomes reach poorer households. Investment in productive equipment can raise future capacity. Stronger spending can also raise prices near capacity; energy use and waste may damage the environment.
What is real GDP growth from 100 to 105 million?
The increase of 5 is divided by the initial 100.
Test the limits
- Growth from using idle resources differs from an increase in productive potential. A higher GDP need not mean every resident is better off.
- Compare real output per person, employment, distribution and environmental evidence. Avoid adding final products and their intermediate inputs twice.
Why can output growth fail to reduce poverty?
Distribution matters; the aggregate does not show who benefits.
A rise in nominal GDP alone proves that real output increased.
Nominal GDP may rise because prices increased.
Apply and explain your answer
- Does the fictional 5% GDP growth establish higher average output per person?
- No. Population grows at the same rate, so real GDP per person is unchanged.
Which observation suggests increased productive potential?
Machinery can expand capacity, whereas the other changes do not establish growth in capacity.
Use the terms precisely
- real GDP: Domestic output valued with the effect of price changes removed.
- GDP per person: GDP divided by the population.
Match the terms to their meanings.
Each term describes a specific mechanism in this lesson.
Fictional real GDP rises from 100 million to 105 million: growth = (105−100)/100 × 100 = 5%. Population rises from 10000 to 10500. Real GDP per person stays 10000, since 105000000/10500 = 10000. More production may create jobs and reduce poverty if incomes reach poorer households. Investment in productive equipment can raise future capacity. Stronger spending can also raise prices near capacity; energy use and waste may damage the environment.
Growth from using idle resources differs from an increase in productive potential. A higher GDP need not mean every resident is better off. Compare real output per person, employment, distribution and environmental evidence. Avoid adding final products and their intermediate inputs twice.
GDP measures the value of final goods and services produced within an economy during a period. Real GDP removes the effect of price changes; economic growth is an increase in real output.