Real GDP Per Capita Growth Rate Calculator
Understanding Real GDP Per Capita Growth
Calculating the growth rate of Real GDP per capita is the most effective way to measure the actual improvement in a nation's standard of living. Unlike "Nominal GDP," which includes inflation, "Real GDP" is adjusted for price changes, providing a clearer picture of economic output. By dividing this by the total population, we can see how much economic value is generated per person.
The Formula for Real GDP Per Capita
First, you must determine the Real GDP per capita for each individual year using this calculation:
The Growth Rate Formula
Once you have the figures for two consecutive periods, use the percentage change formula to find the growth rate:
Step-by-Step Example
Imagine a country with the following data:
- Year 1: Real GDP = 500 Billion, Population = 10 Million
- Year 2: Real GDP = 525 Billion, Population = 10.1 Million
Step 1: Calculate Year 1 Per Capita: 500B / 10M = 50,000
Step 2: Calculate Year 2 Per Capita: 525B / 10.1M = 51,980.20
Step 3: Calculate the Growth Rate: ((51,980.20 – 50,000) / 50,000) × 100 = 3.96%
Why It Matters
Positive growth indicates that the economy is expanding faster than the population, typically leading to higher incomes and better quality of life. If the population grows faster than the Real GDP, the growth rate will be negative, suggesting that the average person is becoming economically worse off despite any absolute increase in total GDP.