The annual growth rate measures how much a value increases per year as a percentage of the previous amount. For example, a company measures the growth of the number of goods it sells or profits for the year. You can use this growth rate to figure out the numerical amount after the growth rate has been applies. For example, a company selling 100 cars and another selling 1,000 cars might both have 5 percent growth rates, but the nominal output for the second company will increase significantly more because it started with a higher output.
Divide the annual growth rate by 100 to change it to a decimal. For example, if the annual growth rate for cars sold by a company equals 5 percent, divide 5 by 100 to get 0.05.
Multiply the annual growth rate expressed as a decimal by the starting amount to find the nominal gain. In this example, if the company sold 400 cars, multiply 400 by 0.05 to get 20, meaning that the 5 percent annual growth rate yields a gain of 20 cars sold.
Add the nominal gain to the original amount to find the new nominal output after accounting for the annual growth. In this example, add 20 to 400 to find that the company's car sales increase from 400 to 420 with a 5 percent growth rate.
References
- World Bank: Population Growth Rate
- Bureau of Economic Analysis (BEA). "Gross Domestic Product." Accessed Jan. 16, 2020.
- American Institute for Economic Research. "Your Guide to Understanding Real vs. Nominal GDP." Accessed Jan. 16, 2020.
- Bureau of Economic Analysis. “National Income and Product Accounts Tables," Table 1.1.5. Nominal GDP,” Select “Modify,” Select “First Year 2012,” Select “Series Annual,” Select “Refresh Table.”Accessed Feb. 27, 2020.
- Bureau of Economic Analysis. “National Income and Product Accounts Tables," Table 1.1.6. Nominal GDP,” Select “Modify,” Select “First Year 2012,” Select “Series Annual,” Select “Refresh Table.”Accessed Feb. 27, 2020.
- Bureau of Economic Analysis. “What Is an Implicit Price Deflator and Where Can I Find the GNP IPD?” Accessed Jan. 16, 2020.
- Bureau of Economic Analysis. “National Income and Product Accounts Tables," Table 1.1.9. Nominal GDP,” Select “Modify,” Select “First Year 2012,” Select “Series Annual,” Select “Refresh Table.”Accessed Feb. 27, 2020.
- Bureau of Economic Analysis (BEA). “National Data: National Income And Product Accounts.” Accessed Jan. 16, 2020.
- Bureau of Economic Analysis (BEA). “Measuring the Economy: A Primer on GDP and the National Income and Product Accounts,” Page 2-3. Accessed Jan. 16, 2020.
- Bureau of Economic Analysis (BEA). "What Is GDP?" Accessed Jan. 16, 2020.
- Riane Eisler. “The Real Wealth of Nations: Creating a Caring Economics.” Berrett-Koehler Publishers, 2008.
- Stanford University. "The Facts of Economic Growth," Page 5. Accessed Dec. 25, 2019.
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