University of Central Florida (UCF) ECO2013 Principles of Macroeconomics Practice Exam 3

GDP per capita is calculated by dividing the Gross Domestic Product (GDP) of a country by its total population. This measurement provides an average economic output per person, which is useful for comparing the economic health and standard of living across different countries or regions.

When GDP, which reflects the total value of all goods and services produced within a country, is divided by the population, it allows economists to understand the average economic contribution of each individual, making the data more reflective of the economic conditions experienced by citizens. This metric can help indicate how well off individuals might be, on average, in terms of economic productivity.

The other methods listed, such as subtracting or adding total imports or exports to GDP, do not yield a measure of per capita income and are not relevant to the calculation of GDP per capita. Hence, the correct approach is to divide GDP by the population to achieve the per capita figure.