3.1.3—Real and per capita measures

Real GDP removes price changes; per-capita GDP divides output by population.

Nominal growth can be inflation, and per-capita output can fall while total GDP rises.

State price basis and population denominator.

GDP rises 5% while prices rise 4%, so real growth is roughly 1% before population adjustment.

Per-capita GDP is an average.

Deflate before comparing quantities: $\text{real value}=\text{nominal value}/(\text{price deflator}/100)$. If nominal GDP is $525 billion and the deflator is 105, real GDP is$525/1.05=$500 billion in base-year prices. Then$\text{real GDP per capita}=\text{real GDP}/\text{population}$; with 10 million people, this is$50,000 per person. Apply the same steps to GNI. PPP conversion uses a common purchasing-power price basis for cross-country comparison; it does not make income distribution equal or turn an average into every person's income.