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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?

  1. Proportion of population in the working age
  2. Work participation rate
  3. Per worker productivity

Select the correct answer using the code given below:

Result
Your answer: —  ·  Correct: D
Explanation

The level of per capita GDP is determined by the interaction of productivity, labor participation, and demographics. This relationship can be decomposed as:

Per Capita GDP = (GDP ÷ Workers) × (Workers ÷ Population)

  • Per worker productivity (Statement 3): Represented by (GDP ÷ Workers). Higher productivity directly increases the output generated per person.
  • Work participation rate (Statement 2): Refers to the percentage of the population that is employed. A higher participation rate increases the (Workers ÷ Population) ratio, boosting per capita income.
  • Proportion of population in the working age (Statement 1): This demographic factor sets the potential size of the workforce. A larger share of working-age people (demographic dividend) allows for a higher number of workers relative to dependents, increasing per capita GDP.

Thus, all three factors are crucial determinants.

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