Question

When computing economic growth, changes in nominal gross domestic product (GDP) must be adjusted to reflect population growth because:

Choose one:

A. changes in population tend to have no effect on standard of living.

B. if real GDP remains the same, an increase in the population actually means a raised average standard of living

.C. an increase in the population will tend to decrease average prices.

D. an increase in population will tend to reduce nominal GDP.

E. if real GDP remains the same, an increase in the population actually means a lower average standard of living.

Answer 1

Answer

Option E

E. if real GDP remains the same, an increase in the population actually means a lower average standard of living.

Economic growth rate approximately =nominal GDP growth rate - prices change - population growth rate

the nominal GDP is adjusted for prices and the real GDP is adjusted for individual change in growth as the per capita GDP change is the economic growth rate.