How much did real GDP change from year 1 to year 2 in country A?

To determine how much real GDP changed from year 1 to year 2 in country A, it is necessary to compare the GDP figures of the two years and calculate the percentage change. A negative percentage indicates that the economy contracted, which is the case with a decline of 12.5%.

This percentage is derived from the formula for calculating growth rate:

[ \text{Growth Rate} = \frac{\text{GDP in Year 2} - \text{GDP in Year 1}}{\text{GDP in Year 1}} \times 100 ]

Given that the answer indicates a negative change, it signifies that the GDP in year 2 was lower than in year 1, reflecting a decrease in economic activity or output within the country.

Understanding that economic contractions can occur due to various factors such as decreased consumer demand, reduced investments, or adverse economic conditions can further clarify why this negative change is significant. A 12.5% decrease in real GDP suggests a substantial downturn, reflecting potential challenges faced by the economy during that time period.

This analysis informs us that a contraction in real GDP can have far-reaching implications on employment, income levels, and overall economic stability, illustrating the essential role GDP plays