Question

Economists measure both the level of real GDP per person and the growth rate of real GDP per person. Each statistic captures a different concept. Describe each concept.

Answer 1

The value of real GDP per person is a stock concept. It is used to measure how economically well off the average person in a country is at a given point. The higher the value fo real GDP per person, the more well off an average citizen in the country is.

Real GDP growth per person, on the other hand, is a flow concept. It measures if the level of the economic well being of the average person is increasing over time, and if yes, at what rate. This is the most important macroeconomic variable as it tells us if the people are really growing their incomes and it can be used to compare the economic situation with other countries, even at different levels of real GDP per capita.