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Chapter 7: Q.15 (page 186)

How is GDP per capita calculated differently from labor productivity?

Short Answer

Expert verified

For calculating GDP per capita from the labor productivity method used is GDP divided by the total number of workers.

Step by step solution

01

Definition

GDP per capita is the per capita value of the total output produced in an economy.

02

Explanation

When the total GDP of an economy is divided by the total population present in that economy then it shows the GDP per capita of the economy attained in a given period.

The labor productivity is calculated by dividing the total output by total number of workers. Another method of calculating labor productivity is taking the ratio of total output produced and total labor hours employed.

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Most popular questions from this chapter

An economy starts off with a GDP per capita of$5,000. How large will the GDP per capita be if it grows at an annual rate of 2%for 20years? 2%for 40years?

4%for 40years? 6%for 40years?

Why does productivity growth in high-income economies not slow down as it runs into diminishing returns from additional investments in physical capital and human capital? Does this show one area where the theory of diminishing returns fails to apply? Why or why not?

What are the "advantages of backwardness" for economic growth?

Use an example to explain why, after periods of rapid growth, a low-income country that has not caught up to a high-income country may feel poor.

Change in labor productivity is one of the most watched international statistics of growth. Visit the St. Louis Federal Reserve website and find the data section (http://research.stlouisfed.org). Find international comparisons of labor productivity, listed under the FRED Economic database (Growth Rate of Total Labor Productivity), and compare two countries in the recent past. State what you think the reasons for differences in labor productivity could be.
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