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The U.S. is a high per capita GDP country. But there is significant variation in the standard of<br />

living in the different states. In 2013, the per capita personal income in Connecticut was 76%<br />

higher than the per capita personal income in Mississippi. The table in Example 15 below shows<br />

per capita personal income for the fifty states and Washington D.C. for 2013. The information is<br />

from the Bureau of Economic Analysis.<br />

Example 15:<br />

Per Capita Personal Income - 2013<br />

Washington D.C. $74,513 25. Texas $43,552<br />

1. Connecticut $60,847 26. Wisconsin $43,149<br />

2. North Dakota $57,084 27. Florida $41,692<br />

3. Massachusetts $56,923 28. Oklahoma $41,586<br />

4. New Jersey $55,993 29. Maine $41,014<br />

5. Maryland $54,259 30. Ohio $40,865<br />

6. New York $54,063 31. Louisiana $40,689<br />

7. Wyoming $50,924 32. Oregon $40,233<br />

8. New Hampshire $50,156 33. Missouri $39,897<br />

9. Alaska $50,032 34. Tennessee $39,324<br />

10. Virginia $48,773 35. Michigan $39,215<br />

11. Minnesota $47,856 36. Montana $39,199<br />

12. California $47,401 37. Nevada $38,920<br />

13. Washington $47,031 38. Indiana $38,812<br />

14. Rhode Island $47,012 39. North Carolina $38,457<br />

15. Illinois $46,780 40. Georgia $38,179<br />

16. Colorado $46,610 41. Arizona $36,823<br />

17. Nebraska $46,033 42. Alabama $36,501<br />

18. Pennsylvania $45,926 43. New Mexico $36,284<br />

19. Vermont $45,783 44. Utah $36,274<br />

20. Hawaii $45,652 45. Kentucky $36,239<br />

21. South Dakota $45,558 46. Arkansas $36,086<br />

22. Iowa $45,114 47. West Virginia $35,613<br />

23. Delaware $45,092 48. South Carolina $35,454<br />

U.S. Average $44,543 49. Idaho $35,382<br />

24. Kansas $43,916 50. Mississippi $34,478<br />

Real GDP<br />

As noted earlier, nominal GDP numbers may change from year to year either because production<br />

has changed, or because of a change in the price level. If GDP numbers from different years are<br />

to be fairly compared, an adjustment must be made for changes in the price level. In calculating<br />

Real GDP, we use a price index called the GDP deflator. It is similar to the Consumer Price<br />

Index, but is based on the prices of all goods and services included in GDP.<br />

Real GDP – GDP adjusted for changes in the price level.<br />

Example 16A: GDP was $5,980 billion in 1990 and was $6,174 billion in 1991. What was Real<br />

GDP in 1991, adjusted to the 1990 price level? The GDP deflator was 66.8 in 1990 and was 69.0<br />

in 1991.<br />

Real GDP (1991) = Nominal GDP for 1991 ÷ (Deflator for 1991 ÷ Deflator for 1990) =<br />

$6,174B ÷ (69.0 ÷ 66.8) = $6,174B ÷ 1.0329 = $5,977B<br />

FOR REVIEW ONLY - NOT FOR DISTRIBUTION<br />

Notice that even though nominal GDP increased from 1990 to 1991, Real GDP did not. Real GDP<br />

decreased from 1990 to 1991. The increase in nominal GDP was due solely to the increase in the<br />

price level (inflation).<br />

5 - 5 Measuring Total Output: GDP

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