If real GDP grows at a faster rate than does population, then the standard of living, as measured by real GDP per person

Question

BlackTom AI · Accepted Answer

Let’s restate the question to set the stage: If real GDP grows at a faster rate than population, then the standard of living, as measured by real GDP per person, ____.

Option 1: 'worsens.' This would imply that faster growth in GDP relative to population reduces real GDP per person, which contradicts the idea that output per person increases when total output grows faster than the number of people. So this choice misreads the relationship between aggregate growth and per-capita measures.

Option 2: 'improves.' Real GDP per person is roughly real GDP divided by population. If real GDP grows more quickly than population, the quotient increases, meaning more output per person. This aligns with the standard macroeconomic intuition that per-capita living standards rise when growth outpaces population growth.

Option 3: 'remains the same.' This would require proportional growth in real GDP and population, such that the ratio real GDP per person stays constant. The condition given specifies that GDP grows faster than population, not in lockstep, so this option misstates the consequence.

Option 4: 'cannot be measured.' In principle, real GDP per person is a standard metric used to gauge living standards, and the comparison described directly affects that measure. Therefore this claim is incorrect on methodological grounds.

Option 5: 'either improves, worsens, or stays the same, depending on the size of the population and the actual level of real GDP.' While population size and GDP levels matter in some nuanced contexts, the stated condition—real GDP growing faster than population—consistently implies an increase in real GDP per person. The ratio will rise as long as GDP growth outstrips population growth, so this option overcomplicates the straightforward ratio effect.

In summary, the logic hinges on the definition of real GDP per person as real GDP divided by population. When the numerator grows faster than the denominator, the ratio increases, indicating an improvement in living standards as measured per person. The other options either deny this relationship, rely on incorrect implications, or mischaracterize what can be measured.

ECON 210-003 Homework 7

If real GDP grows at a faster rate than does population, then the standard of living, as measured by real GDP per person

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