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:
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(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 | |
| 2011 | 1,774,063 | 1,801,079 | 34,339,328 | |
| 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 |
Data source: Statistics Canada
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
where net factor payments from abroad = (factor payments from abroad) – (factor payments to abroad).
GDP and GNP are typically very similar and widely used for comparisons. However, GNP (or Gross National Income, GNI), is conventionally used for international comparisons by organizations such as the World Bank. International comparisons are further complicated by the fact that currencies differ across countries and for meaningful cross-country comparisons, GDP must be expressed in a common currency.
A measure of the total market value of all final goods and services produced during a specific period by a country’s factors of production regardless of their location. Equal to GDP plus net factor payments from abroad.
