Question

The annual rate of growth of real GDP in a developing nation is $0.3$percent. Initially, the country's population was stable from year to year. Recently, however, a significant increase in the nation's birthrate has raised the annual rate of population growth to $0.5$percent.

a. What was the rate of growth of per capita real GDP before the increase in population growth?

b. If the rate of growth of real GDP remains unchanged, what is the new rate of growth of per capita real GDP following the increase in the birthrate?

Short answer

(a) The rate of growth of per capita real GDP before the increase in population growth is$0.3\%$

(b) The new rate of growth of per capita real GDP following the increase in the birthrate is$-0.2\%$

Step-by-step solution

Given information (part a)

The given information to find the rate of growth of per capita real GDP is as follows:

The annual rate of real GDP growth is$0.3\%$

Real Gross Domestic Product.

The monetary market worth of all final goods and services produced within a nation's domestic territory during a specific period of time is referred to as GDP.

From the base period to the current time, real GDP is the nominal GDP adjusted by rising price levels (inflation).

The rate of growth of a variable is the rate at which that variable expands over time.

Formula for Rate of growth of per capital real GDP.

The following is the link between population growth rate, real GDP growth rate, and per-capita real GDP growth rate:$Populationgrowthrate=\left(RealGDPgrowthrate\right)-\left(RateofgrowtrhofpercapitalRealGDP\right)$

Therefore,

$RateofgrowtrhofpercapitalRealGDP=\left(RealGDPgrowthrate\right)-\left(Populationgrowthrate\right)$

Find the rate of growth of per capita real GDP (part a).

To determine the rate of growth of per-capita real GDP in the absence of such a change in the population growth rate, substitute the values of real GDP growth rate $0.3$percent. This is accomplished as follows:

$RateofgrowtrhofpercapitalRealGDP=\left(RealGDPgrowthrate\right)-\left(Populationgrowthrate\right)$

$$\begin{gathered} =0.3\%-0\% \\ =0.3\% \end{gathered}$$

Therefore, the Rate of growth of per capita real GDP before the increase in population growth is$0.3\%$

Given Information (part b).

The following are the values to find the new rate of growth of per capita real GDP is,

Real GDP Growth rate is $0.3\%$

Population Growth rate is$0.5\%$

Find the rate of growth of per capital real GDP (part b). 

Assume that the country's birth rate has boosted the population growth rate to $0.5$percent. The real GDP growth rate remained constant at $0.3$percent.

Following an increase in population growth, the rate of growth of per-capital real GDP is computed as follows:

$RateofgrowtrhofpercapitalRealGDP=\left(RealGDPgrowthrate\right)-\left(Populationgrowthrate\right)$$$\begin{gathered} =0.3\%-0.5\% \\ =-0.2\% \end{gathered}$$

Hence, the rate of growth of per capital real GDP following the increase in the birthrate is$-0.2\%$