From 2018 to 2019, nation A's real GDP increased from $100 billion to $106 billion, and its population grew from 50 million to 51 million. Real GDP per capita changed as which of the following?

• A. Decreased; more slowly
• B. Increased; more slowly
• C. Decreased; faster
• D. Increased; faster

Answer: (D)

The key idea is how real GDP per capita changes when both real GDP and population change. Real GDP per capita is real GDP divided by population.

Initial per capita: 100 billion / 50 million = 2,000 dollars per person. Final per capita: 106 billion / 51 million ≈ 2,078 dollars per person. So real GDP per capita increases. The rate of that increase is about (2,078 − 2,000) / 2,000 ≈ 3.9%. Population grew from 50 million to 51 million, a 2% increase. Since per capita GDP rose and its growth rate (≈3.9%) is faster than the population growth (2%), real GDP per capita increased at a faster pace.