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Q118 (CDS-I/2024) Economy › Basic Concepts & National Income › National income aggregates Answer Verified

Level of per capita GDP depends upon which of the following?

Result
Your answer: —  Â·  Correct: D
Explanation

The level of per capita GDP is fundamentally determined by the relationship between a nation's total economic output (GDP) and its total population. Mathematically, per capita GDP is calculated by dividing the total GDP by the population [2]. Consequently, any factor that influences the numerator (GDP) or the denominator (population) directly affects the per capita level. Total GDP itself is driven by labor productivity, which depends on human capital, physical capital accumulation, and technological progress [3]. As noted in economic theory, per capita production functions show that increases in capital per person and technology lead to higher output per person. Therefore, the level of per capita GDP depends on the size of the national income (GDP), the size of the population, and the productivity of the labor force, making all three factors essential determinants.

Sources

  1. [1] Indian Economy, Vivek Singh (7th ed. 2023-24) > Chapter 1: Fundamentals of Macro Economy > 1.11 Macroeconomic Variables > p. 17
  2. [2] https://www.investopedia.com/terms/p/per-capita-gdp.asp
  3. [3] https://www.nuffield.ox.ac.uk/Users/Cameron/lmh/pdf/m1-04.pdf
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