Question

GDP per capita in the United States was approximately $55,000 in 2015 Use the growth formula to answer the following questions: a. What will it be in the year 2021 if GDP per capita grows each year by 1 percent? GDP in 2021: b. What will it be in the year 2021 if GDP per capita grows each year by 3 percent? GDP in 2021: Growth Formula: (future value) - (present value)*(1 + r)At present value this year's GDP per capita future value GDP per capita in the future r rate of increase (in decimal form) per year t = number of years of growth

Answer 1

Gross domestic product is the final value of all the finished goods and services produced within a country in a year.

Here GPD per capita in US is 55,000$ in 2015

As, the growth formula is mentioned in the data, that is

Growth Formula: (future value) = (present value) × (1 + r)^t, where present value = this year's GDP per capita, future value = GDP per capita in the future, r = the rate of increase (in decimal form) per year and t = number of years of growth (Here 6 years between 2015 and 2021)

We have

A. Future value = Present Value x ( 1 + r ) ^ t  

Future value = 55,000$ x ( 1 + 0.01 ) ^ 6

= 55,000$ x ( 1.01   ) ^ 6

= 55,000$ x 1.061

GDP per capita in 2021 if it grows by 1%   = 58,355 $

B. Again, GDP per capita in 2021 if it grows by 3%

  Future value = 55,000$ x ( 1 + 0.03 ) ^6

= 55,000$ x ( 1.04   ) ^6

  = 55,000$ x 1.265

= 69,575 $

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