The formula for calculating a country’s total economic output per person after adjusting for inflation is known as the Real GDP Per Capita Formula. Real GDP per capita is computed by dividing the country’s real GDP (total economic output adjusted for inflation) by the total number of people in the country, according to the formula.
What is the formula for calculating real GDP per capita?
The percentage change in real GDP per capita between two consecutive years is used to compute the annual growth rate of real GDP per capita. GDP at constant prices is divided by the population of a country or area to get real GDP per capita. To make calculating country growth rates and aggregating country data easier, real GDP data are measured in constant US dollars.
What is the formula for real GDP calculation?
The real GDP of a country is an inflation-adjusted estimate of its economic production over a year. GDP is primarily estimated using the expenditure technique, using the formula GDP = C + G + I + NX (where C stands for consumption, G for government spending, I for investment, and NX for net exports).
Is GDP calculated per capita?
The Gross Domestic Product (GDP) per capita is calculated by dividing a country’s GDP by its total population. The table below ranks countries throughout the world by GDP per capita in Purchasing Power Parity (PPP), as well as nominal GDP per capita. Rather to relying solely on exchange rates, PPP considers the relative cost of living, offering a more realistic depiction of real income disparities.
In Excel, how do I compute actual GDP?
GDP is equal to the sum of C, I, G, and NX. The fact that GDP may be calculated as the sum of Consumption (C), Investment (I), Government spending (G), and Net Exports (N) is expressed in this fundamental equation (NX).
What are the three methods for calculating GDP?
The value added approach, the income approach (how much is earned as revenue on resources utilized to make items), and the expenditures approach can all be used to calculate GDP (how much is spent on stuff).
How is real GDP calculated using nominal GDP and a price index?
Multiplying by 100 produces a beautiful round value, which is useful for reporting. To calculate real GDP, however, the nominal GDP is divided by the price index multiplied by 100.
The price index is set at 100 for the base year to make comparisons easier. Prices were often lower prior to the base year, so those GDP estimates had to be inflated to compare to the base year. When prices are lower in a given year than they were in the base year, the price index falls below 100, causing real GDP to exceed nominal GDP when computed by dividing nominal GDP by the price index. For the base year, real GDP equals nominal GDP.
Another way to calculate real GDP is to count the volume of output and then multiply that volume by the base year’s prices. So, if a gallon of gas cost $2 in 2000 and the US produced 10,000,000,000 gallons, these figures can be compared to those of a subsequent year. For example, if the United States produced 15,000,000,000 gallons of gasoline in 2010, the real increase in GDP due to gasoline might be estimated by multiplying the 15 billion by the $2 per gallon price in 2000. After that, divide the nominal GDP by the real GDP to get the price index. For example, if gasoline cost $3 a gallon in 2010, the price index would be 3 / 2 100 =150.
Of course, both methods have their own set of complications when it comes to estimating real GDP. Statisticians are forced to make assumptions about the proportion of each sort of commodity and service purchased over the course of a year. If you’d want to learn more about how this chain-type annual-weights price index is calculated, please do so here: Basic Formulas for Quantity and Price Index Calculation in Chains
What is a GDP per capita?
Gross domestic product divided by midyear population equals GDP per capita. Gross domestic product (GDP) at purchaser’s prices is the sum of gross value contributed by all resident producers in the economy, plus any product taxes, minus any subsidies not included in the product value.
Is per capita GDP the same as per capita income?
The government issued a flood of statistics this week. GDP growth in 2012-13 is expected to be better than 7.2 percent, but not near to the potential of 8.6 percent, according to the government. In 2010-11, per capita income surpassed Rs 50,000 for the first time. What are your thoughts on these figures as a layperson?
The value of a country’s economic output is measured by GDP, or Gross Domestic Product. Here’s a simple example for newcomers. Consider the following six brothers: A, B, C, D, E, and F. What each of them does for a living is as follows:
D: Produces steel sheets. His total sales for the year are Rs 1 lakh. He has sold steel sheets to B for Rs 25000 out of this Rs 1 lakh.
E: Rice producer and seller. His total sales for the year are Rs 50,000. He has sold grains to C for Rs 20000 out of the Rs 50.000.
(In all of these examples, the sale price includes the cost of raw materials, labor, and the owner’s profit.)
Step 2: Determine overlapping sales, also known as intermediate consumption, which is when one person’s sale becomes raw material for another. This equates to Rs 45,000.
Step 3: To avoid double counting, reduce total sales by intermediate consumption (for instance, the sale value of B includes the cost of steel sheets purchased from D). This comes to a total of Rs 12.05 lakh.
This six-brother family’s GDP is Rs 12.05 lakh. Instead of 6 brothers, we now have the GDP of a country when this operation is repeated for the entire country.
The rate of GDP growth shows the economy’s speed. For example, due to a downturn in the US economy, GDP has been increasing at a snail’s pace of 1-2 percent in recent years, occasionally dipping into negative territory. India, on the other hand, has had GDP growth of 7-8 percent in recent years. And the government expects it to hit 7.2 percent in 2012-13.
While 7.2 percent growth seems impressive, especially in light of the current global economic climate and when compared to 1-2 percent growth rates elsewhere, it does not convert into much for India’s level of living. Not in the foreseeable future, at least. This is where Gross National Income (GNI) per capita and GDP per capita come into play.
The GDP per capita is just the GDP divided by the total population of a country. In our case, this would be Rs 12.05 lakh divided by the total number of people employed by each of the six brothers’ factories. The GDP per capita closely reflects the ‘average’ revenue per person in the economy because the GDP is divided by the total number of workers. It is expected that when GDP rises, everyone in the chain will profit, and that the increase will have a trickle-down effect on the populace, raising the standard of living. If you make more money, you may pay more for your domestic help, raising their standard of living. Of obviously, the rate of growth must be higher than the rate of inflation.
Before I get to the main point, I need to go over a few more clarifications. So please be patient with me. The Gross National Income, or GNI, differs slightly from the GDP. GNI incorporates net revenue earned from foreign nations, whereas GDP exclusively counts output and services within a country. The gross national income (GNI) divided by the population equals per capita GNI.
India’s per capita income has now surpassed Rs 50,000 for the first time in 2010-2011, according to the government. It costs Rs 53,000, or about $1,000 USD. This is based on current or market values. At constant prices, that is, after inflation, the same works out to USD 790.
In absolute terms, statistics are meaningless. So, let’s get down to business with some serious global comparisons. According to a 2010 HSBC analysis, these countries were ranked in terms of GDP as follows:
So that was when India was at number eight. Let’s take a look ahead. According to the research, the top economies will be in place by 2050.
India ranked last in 2010 in terms of income per capita among the top 30 largest economies in 2050, and it will continue to rank last in 2050. In 2010, China was ranked 27th, but by 2050, it will be ranked 20th. According to the report, India’s population will surpass China’s by 2050.
There isn’t much left after the massive GDP trickles down. Consider China’s GDP in 2050 with a population of nearly the same size. In absolute terms, the United States has the biggest GDP, but it also has a smaller population than China and India. In terms of absolute GDP, China is second only to the United States, but the country’s massive population drives down GDP to levels well below those of the United States. However, because the GDP is enormous, the per capita GDP is higher than that of India.
Expenditure Approach
The most widely used GDP model is the expenditure approach, which is based on the money spent by various economic participants.
C = consumption, or all private consumer spending in a country’s economy, which includes durable goods (things having a lifespan of more than three years), non-durable products (food and clothing), and services.
G stands for total government spending, which includes salaries, road construction/repair, public schools, and military spending.
I = the total amount of money spent on capital equipment, inventory, and housing by a country.
Income Approach
The total money earned by the goods and services produced is taken into account in this GDP formula.
Total National Income + Sales Taxes + Depreciation + Net Foreign Factor Income = Gross Domestic Product