Worked Problem: A Change in Fortune?

In Figure 11-2on page 335, we compare real versus nominal GDP in Venezuela for the period 2000 to 2010. The accompanying table shows the underlying data on nominal GDP (in billions of bolivars), real GDP (in billions of 1997 bolivars), and population (in thousands) for the years 2000, 2002, 2004, 2006, 2008, and 2010. For each period, 2000–2002, 2002–2004, 2004–2006, 2006–2008, and 2008–2010, calculate the real growth rate in GDP per capita.

Year Nominal GDP (billions of bolivars) Real GDP (billions of 1997 bolivars) Population (thousands)
2000 VEB79,655.69 VEB41,013.29 24,765
2002    107,840.17       38,650.11 25,220
2004    212,683.08       42,172.34 26,127
2006    393,926.24       51,116.53 27,031
2008    677,593.64       58,525.07 27,935
2010 1,016,834.75       55,807.51 28,834

Calculate real GDP per capita (in bolivars) for each year in the table.

Read the section “What Real GDP Doesn’t Measure,” beginning on page 334. Real GDP per capita is GDP divided by the size of the population and is equivalent to average GDP per person.

Real GDP per capita for each of the years is listed in the table below. For 2000, real GDP per capita is calculated by multiplying VEB41,013.29 by 1 billion, and then dividing by 24,765 multiplied by 1,000: (VEB41,013.29 × 1,000,000,000)/(24,765 × 1,000). Multiplying the numerator by 1 billion and multiplying the denominator by 1,000 is done to correct for the fact that real GDP is expressed in billions of bolivars and the population is expressed in thousands of people.

Year Real GDP (billions of 1997 bolivars) Population (thousands) Real GDP per capita (thousands of 1997 bolivars)
2000 VEB41,013.29 24,765 VEB1,656
2002       38,650.11 25,220       1,533
2004       42,172.34 26,127       1,614
2006       51,116.53 27,031       1,891
2008       58,525.07 27,935       2,095
2010       55,807.51 28,834       1,935

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Calculate the change in real GDP per capita for the periods 2000–2002, 2002–2004, 2004–2006, 2006–2008, and 2008–2010.

The percent change in real GDP per capita between year 1 and year 2 is calculated using the following formula:

Note the similarity between this equation and Equation 11-2 on page 337. They are similar because both measures calculate rates of change.

The percent change in real GDP per capita for each of the periods is presented in the second column of the table.

Year % Change in real GDP per capita
2000–2002 −7.43%
2002–2004  5.28%
2004–2006 17.16%
2006–2008 10.79%
2008–2010 −7.64%

The percent change in real GDP per capita for 2000–2002 is calculated by subtracting real GDP per capita in 2000 from real GDP per capita in 2002, dividing by real GDP per capita in 2000, and then multiplying this expression by 100: