Part 1: Consider the following data.
|
Country
|
Population
|
Real GDP
($ billions)
|
|
A
|
10
|
55
|
|
B
|
20
|
60
|
|
C
|
5
|
70
|
What is the per capita real GDP in each of these countries?
Part 2: Now consider the following hypothetical situation:
Per capita real GDP in country L is three times as high as in country M. The economic growth rate in country M is 8 percent while country L’s economy grows at a rate of 5 percent.
Use table below to determine approximately how many years will it be before per capita GDP in country M surpasses per capita real GDP in country L.
|
Interest Rate
|
|
Number of Years
|
3%
|
4%
|
5%
|
6%
|
8%
|
10%
|
20%
|
|
1
|
1.03
|
1.04
|
1.05
|
1.06
|
1.08
|
1.10
|
1.20
|
|
2
|
1.06
|
1.08
|
1.10
|
1.12
|
1.17
|
1.21
|
1.44
|
|
3
|
1.09
|
1.12
|
1.16
|
1.19
|
1.26
|
1.33
|
1.73
|
|
4
|
1.13
|
1.17
|
1.22
|
1.26
|
1.36
|
1.46
|
2.07
|
|
5
|
1.16
|
1.22
|
1.28
|
1.34
|
1.47
|
1.61
|
2.49
|
|
6
|
1.19
|
1.27
|
1.34
|
1.41
|
1.59
|
1.77
|
2.99
|
|
7
|
1.23
|
1.32
|
1.41
|
1.50
|
1.71
|
1.94
|
3.58
|
|
8
|
1.27
|
1.37
|
1.48
|
1.59
|
1.85
|
2.14
|
4.30
|
|
9
|
1.30
|
1.42
|
1.55
|
1.68
|
2.00
|
2.35
|
5.16
|
|
10
|
1.34
|
1.48
|
1.63
|
1.79
|
2.16
|
2.59
|
6.19
|
|
20
|
1.81
|
2.19
|
2.65
|
3.20
|
4.66
|
6.72
|
38.30
|
|
30
|
2.43
|
3.24
|
4.32
|
5.74
|
10.00
|
17.40
|
237.00
|
|
40
|
3.26
|
4.80
|
7.04
|
10.30
|
21.70
|
45.30
|
1470.00
|
|
50
|
4.38
|
7.11
|
11.50
|
18.40
|
46.90
|
117.00
|
9100.00
|