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24 November, 05:28

We have a separate country known as Lezette-ville. The GDP per capita in 2010 was $18,000 in 2010 dollars. While in 2018, the GDP per capita was $20,725 in 2018 dollars. The CPI in 2010 is 218 while the CPI in 2018 is 251. How would you characterize the growth in GDP per capita from 2010 to 2018?

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  1. 24 November, 05:58
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    It will be a nominal increase. Not a real increase in the purchase power of the persons

    Explanation:

    We will check for the effect of inflation:

    18,000 x 251/218 = 20.724,77

    18,000 dollars in 2010 have aprroximate the same purchase power of 20,725 dollars in 2018

    Therefore, there was no real wroth in the GDP per capita from this time period.

    It was all nominal increase, there was no improve in the purchase power of the consumer.
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