Question

In 1980, Denmark had a GDP of \$70 billion (measured in U.S. dollars) and a population of 5.1 million. In 2000, Denmark had a GDP of \$160 billion (measured in U.S. dollars) and a population of 5.3 million. By what percentage did Denmark's GDP per capita rise between 1980 and \(2000 ?\)

Short answer

Denmark's GDP per capita increased by approximately 120% between 1980 and 2000.

Step-by-step solution

Calculate Per Capita GDP for both years

To calculate per capita GDP (i.e., GDP per person), divide the total GDP by the total population. For 1980, the per capita GDP is \( \$70 \text{{ billion}} / 5.1 \text{{ million}} \). For 2000, the per capita GDP is \( \$160 \text{{ billion}} / 5.3 \text{{ million}} \).

Solve the Arithmetic

The per capita GDP for 1980 is approximately \$13725.49 after rounding to the nearest cent. The per capita GDP for 2000 is approximately \$30188.68 after rounding to the nearest cent.

Calculate the Percentage Change

The formula for percentage change is \((\text{{New value}} - \text{{Old value}}) / \text{{Old value}}\) times 100%. Here, the new value is the per capita GDP for 2000 and the old value is the per capita GDP for 1980. Applying the formula, the percentage change from 1980 to 2000 is \((\$30188.68 - \$13725.49) / \$13725.49 \times 100%\).

Solve the Percentage Change

After performing the calculation in Step 3, the change in Denmark's GDP per capita from 1980 to 2000 is approximately 120% after rounding to the nearest whole percent. This is an increase, as the result is positive. Thus, the per capita GDP in Denmark increased by about 120% between 1980 and 2000.

Key concepts

Understanding Economic Growth

Economic growth is a critical indicator of a country's economic health and is closely monitored by economists, policymakers, and investors alike. The term refers to the increase in the value of goods and services produced by an economy over time. It's often measured as the percentage increase in real gross domestic product (GDP) or real GDP per capita, which is GDP adjusted for inflation and divided by the total population.

Growth can be driven by various factors, including technological innovations, increased production efficiency, or higher levels of investment. When an economy is growing, it often leads to better employment rates, higher incomes, and improved living standards. However, it's important to consider not just the rate of growth but also its sustainability and whether it's accompanied by improvements in quality of life and reduction in income inequality.

Macroeconomics Fundamentals

Macroeconomics is a branch of economics that studies the behavior and performance of an economy as a whole. It focuses on aggregate changes in the economy such as GDP, unemployment rates, national income, price indices, and the interrelations among these different sectors. Macroeconomists develop models that analyze the dynamics of the economy on a large scale to help understand how economic policies will affect the general economic health.

In macroeconomics, GDP per capita is a crucial metric as it measures the average economic output per person, giving insight into how prosperous a country feels to its average citizen. It is essential for comparing the economic performance of different countries and assessing the standard of living across time periods. As such, the exercise involving Denmark's GDP per capita change between 1980 and 2000 offers a glimpse into how the country's economy has developed over that period.

Percentage Change Calculation Explained

The percentage change calculation is a mathematical concept used to express the degree of change over time. It is widely used in various fields such as economics, finance, and general statistics to compare differences between two values. To calculate the percentage change, one subtracts the old value from the new value, then divides that amount by the absolute value of the old value, and finally multiplies the result by 100 to convert it to a percentage.

This calculation can provide an intuitive grasp of the size of change. For example, when given the GDP per capita figures for Denmark in 1980 and 2000, this calculation helps to quantify the economic growth that has occurred. Knowing how to compute percentage change is vital for interpreting economic data because it allows for a normalized comparison over time or between different countries or regions, regardless of the absolute values involved.