ABSTRACT

Economic growth is defined as the increase in real output per capita of a country. There are thus three elements involved in its measurement. First, the change in output of an economy needs to be measured. The most commonly used measure of output is GNP. However, as explained in Chapter 12, money GNP or GNP at current prices can overestimate changes in a country’s output. This is because they include increases due to higher prices (inflation) as well as higher output. Therefore, real GNP figures (or chained data) are used to calculate growth. Second, the GNP figures need to be adapted to take account of increases in population. Dividing real GNP by the population gives real GNP per capita.