Development and Finance from issue 2009/4

Dániel Kehl - Béla Sipos

Potential Impacts of Changes in per Capita GDP

- Abstract -

JEL C-51

When it comes to comparing economic development levels on an international scale, it is generally real GDP per capita that is used. Whereas nominal GDP is the value of GDP expressed in monetary terms, real GDP tackles the impact of inflation by calculating the amount of goods and services included in GDP at a price in a certain base period. An increase in nominal GDP can be triggered not only by expanding production but also by increased price levels, which is why calculating real GDP enables comparisons to be made based on time. We can calculate the aggregate results as if price levels had not changed since the base year (e.g. since 2005 in our analysis). In this case the GDP deflation index in 2005 is 100%. For an international comparison, GDP is measured by country and per capita, which can be regarded as a raw productivity macro index. (The GDP produced by a given country in a given year is divided by the average population of the country in the given year.) Looking at domestic consumption, the schematic equation used to calculate GDP is as follows: GDP = private consumption + government spending + investment + exports – imports.

Dániel Kehl, assistant professor (University of Pécs)
Béla Sipos, DSc, professor of economics (University of Pécs)

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