QUESTION 90 (6 marks)
In a hypothetical year nominal GDP grows 5%, the GDP deflator grows 4% and population grows 1.5%. Calculate real GDP growth and real GDP-per-capita growth using ratios. Evaluate a minister’s statement that 5% GDP growth demonstrates strong gains in average living standards.
Practice marking scheme
Answer
Real GDP grows approximately 0.96%; real GDP per capita falls approximately 0.53%.
Working
Real growth = 1.05/1.04 − 1 = 0.96154%. Per-capita growth = 1.05/(1.04 × 1.015) − 1 = −0.53050%. Most nominal growth reflects prices, and population grows faster than real output. The headline alone overstates per-person output gains and omits distribution, services and environmental effects. It does not demonstrate strong average welfare improvement.
Marking criteria
- Calculates real GDP growth. [2 marks]
- Calculates real per-capita growth using the combined ratio. [2 marks]
- Evaluates the claim with inflation/population and a welfare limitation. [2 marks]
Practice question aligned to the current QCAA syllabus; review the worked solution and marking criteria.
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