How to Calculate Real GDP Per Capita (2 Easy Formulas)

Real GDP per capita is a measure of a country’s total economic output that accounts for its population, as well as inflation. This economic indicator is often used to compare the standard of living in a country over time, as well as the standard of living between several countries.

If you want to know how to calculate the real GDP per capita of a country, keep reading to learn more about the formulas, as well as the definitions.

Explanation of definitions

In order to calculate real GDP per capita, you must first understand what this concept represents, as well as the components it consists of. The following concepts are the integral parts of this economic indicator:

GDP, or gross domestic product, is the first essential concept, which measures the value of everything one country produces over the course of one year. The main elements of GDP are government spending, business investments, personal consumptions, as well as exports subtracted by imports. Most government agencies around the world report their analysis quarterly, updating the GDP estimate monthly.

The second concept is “real GDP”, which represents the GDP without taking price changes into account. The “nominal” (regular) GDP is often higher due to inflation, making real GDP a much more accurate measurement when it comes to comparing a country’s economy over time.

The third concept, “per capita”, simply means “per person”. Real GDP per capita is easily calculated by dividing the real GDP by the population of a certain country. This makes for the best and most efficient way to compare the GDP of countries with various population sizes.

Calculating real GDP per capita

The formula for calculating real GDP per capita is used for determining a country’s total economic output per person, and can easily be calculated by dividing the real GDP of a country by its population. But although simple, the formula might depend on the information you have available. Here are two ways you can calculate real GDP per capita:

1. The first formula is the simplest one to calculate, but it requires collecting all relevant data. If you already know a country’s real GDP (R), all you have to do is divide it by the population (C):

R / C = real GDP per capita

2. The second formula is used when you don’t know a country’s real GDP. The real GDP can be calculated using the nominal GDP (N), as long as you know the implicit price deflator (D), or the ratio of the prices of goods and services if inflation hadn’t happened since the base year. Here’s how you can calculate the real GDP per capita (R) if you just know the nominal GDP (N) and the price deflator (D):

(N / D) / C = real GDP per capita

Regardless of which formula you need to use, the best way to calculate the real GDP per capita of a certain country is to use the official estimates published by its government agencies, and then simply divide those numbers by the country’s population.