Multiple choice

If real national income rises by 10 percent and population increases by 2 percent, per capita income will increase by

  1. 5 percent

  2. 8 percent

  3. 12 percent

  4. 6 percent
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Per capita income growth is calculated as the difference between real national income growth and population growth, but accounting for compounding: (1.10 / 1.02) - 1 = 1.0784 - 1 = 0.0784 ≈ 7.84%, which rounds to 8%. This is because per capita income = Real National Income / Population. When both numerator and denominator change, the percentage change is not simply the arithmetic difference.

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