GDP is the value of national output
Definition
Gross domestic product (GDP): the total value of all goods and services produced within a country in a given period, usually one year.
GDP per capita: a country's GDP divided by its population, giving the average value of output for each person.
- Output cannot be added up in units, so GDP adds it up in money terms, using the prices of the goods and services produced.
- Growth is always worked out from real GDP, which holds prices fixed, so the answer shows a change in output rather than a change in prices.
- Two calculations are needed at this level: the growth rate of real GDP, and GDP per capita.
The growth rate is a percentage change
- The growth rate is the change in real GDP divided by the original real GDP, then multiplied by 100 to turn it into a percentage.
- Divide by the starting value, never the finishing value, because the growth rate measures the change against where the economy began.
- A negative answer means real GDP has fallen, so the economy has shrunk over the period.
Working the growth rate out from data
- Find the change first, then divide by the starting figure, keeping both figures in the same units and the same prices.
Example
- The GDP figures used below are illustrative, chosen to keep the arithmetic clear, and are not the UK's actual real GDP.
Step 1: find the change when real GDP rises from £2,000bn to £2,024bn:
change in real GDP=£2,024bn−£2,000bn=£24bn \text{change in real GDP} = \pounds2{,}024\text{bn} - \pounds2{,}000\text{bn} = \pounds24\text{bn} change in real GDP=£2,024bn−£2,000bn=£24bnStep 2: divide by the original value and multiply by 100:
growth rate=242,000×100=1.2% \text{growth rate} = \frac{24}{2{,}000} \times 100 = 1.2\% growth rate=2,00024×100=1.2%- So real output rose by 1.2% over the year, which is the rate UK real GDP actually grew in the year to April to June 2026 (Source: ONS).
Step 3: repeat the method for a fall, from £2,000bn to £1,980bn:
growth rate=−202,000×100=−1.0% \text{growth rate} = \frac{-20}{2{,}000} \times 100 = -1.0\% growth rate=2,000−20×100=−1.0%- The minus sign carries the meaning here, because it says output was lower than a year before.
GDP per capita divides output by population
- Keep the units the same on the top and the bottom, so pounds are divided by people and the answer comes out in pounds per person.
- A country can have a large total GDP and still have low output per person, because a very large population is being divided into it.
- To find the growth in GDP per capita, work out its percentage change exactly as you would for GDP.
Example
- UK GDP in cash terms was £3,034 billion in 2025, and the UK population on 30 June 2025 was 69.5 million (Sources: House of Commons Library; ONS).
Step 1: write both figures out in the same units:
GDP=£3,034,000,000,000 \text{GDP} = \pounds3{,}034{,}000{,}000{,}000 GDP=£3,034,000,000,000 population=69,500,000 \text{population} = 69{,}500{,}000 population=69,500,000Step 2: divide GDP by the population:
GDP per capita=£3,034,000,000,00069,500,000≈£43,700 \text{GDP per capita} = \frac{\pounds3{,}034{,}000{,}000{,}000}{69{,}500{,}000} \approx \pounds43{,}700 GDP per capita=69,500,000£3,034,000,000,000≈£43,700- So roughly £43,700 of output was produced for each person in the UK in 2025.
Finish by saying what the number means
- A calculated figure only earns its place once it is interpreted, so add a sentence saying what it tells you about the economy.
- A growth rate of 1.2% means real output, and roughly average incomes, were 1.2% higher than a year earlier.
- A rise in GDP per capita means the average person had more output available than before, which is the stronger signal about living standards.
Exam technique
- Substitute the numbers into the formula before reaching for the calculator, so the method stays visible even if the arithmetic slips.
- Attach the unit to the answer, writing a percentage for a growth rate and pounds per person for GDP per capita.
- Check the sign, because a fall in real GDP must come out negative and dropping the minus reverses what the answer says.
Self review
- Write down the formula for the economic growth rate.
- Real GDP rises from £500bn to £515bn. Calculate the growth rate.
- How is GDP per capita calculated from GDP and population?
- Why must you divide by the original value rather than the final value?
- What does a negative growth rate tell you about output?
