# 1.2 Real GDP per Capita

The table in Example 3 (Table 1) suggests that indeed, between 2000 and 2020 Canada’s real GDP has risen from about $1.7 trillion to about$2 trillion. Therefore, we can conclude that the size of the Canadian economy has increased over these 20 years. But is the average Canadian in year 2020 better off compared to year 2000? This question may appear peculiar but consider, for example, a situation whereby the Canadian population has expanded dramatically, so that even though the size of the economic pie is larger in 2020, it is now shared among a much larger number of consumers. Real GDP per capita, which accounts for population growth, is one of the most important measures of living standard in economics. Real GDP per capita for a country or region can be computed as follows:

 (2)

Example 4: Computing Real GDP per Capita

Table 2 below shows Canada’s nominal GDP, the real GDP we computed in Example 3, and population for the period 2010 – 2020. We will practise computing Canada’s real per capita GDP for each year in our sample.

To compute the real GDP per capita, you need to divide the real GDP by the size of the population for each year. Always take care to note the unit in which a variable is measured. The real GDP per capita you will obtain will be measured in millions of 2012 dollars, the unit of measurement of real GDP. We multiply this ratio by 1 million to convert real GDP per capita into 2012 dollars in the last column of Table 2.

 Year Nominal GDP (in millions) Real GDP (in millions) Population Real GDP per capita 2010 $1,666,048$1,740,907 34,004,889 $=\frac{1,740,907}{34,004,889}×1,000,000\phantom{\rule{0ex}{0ex}}=51,195.79$ 2011 1,774,063 1,801,079 34,339,328 $=\frac{1,801,079}{34,339,328}×1,000,000\phantom{\rule{0ex}{0ex}}=52,449.46$ 2012 1,827,201 1,827,201 34,714,222 52,636 2013 1,902,247 1,885,279 35,082,954 53,738 2014 1,994,898 1,938,676 35,437,435 54,707 2015 1,990,441 1,913,886 35,702,908 53,606 2016 2,025,535 1,919,938 36,109,487 53,170 2017 2,140,641 1,998,731 36,545,236 54,692 2018 2,235,675 2,039,849 37,065,084 55,034 2019 2,311,294 2,067,347 37,601,230 54,981 2020 2,206,764 1,959,826 38,037,204 51,524

## Drag and Drop Activity

Click and drag the numbers in the table below to assemble the correct equation for calculating Real GDP per capita.

GDP counts all goods and services produced in the territory of a country by both domestic and foreign nationals. While GDP focuses on the location of production and ignores ownership of factors of production, a closely related concept, Gross National Product (GNP), focuses on the ownership of factors of production and ignores its location. GNP is a measure of the total market value of all final goods and services produced during a specific period by a nation’s factors of production regardless of their location. For example, a student from China working part-time in Canada will contribute both to Canada’s GDP and China’s GNP. Similarly, the value of output produced by a U.S.-owned company operating in Ontario will be counted in the U.S. GNP and Canada’s GDP.

The relationship between GDP and GNP is given by:

GNP = GDP + net factor payments from abroad