Question

Question 2 0.15 pts Real GDP in the US (in 2012 Dollars) was $15.6 trillion in 2007 and $18 trillion in 2017, The growth rate for Real GDP averaged 3.3% in the 15 years before 2007, but has only averaged 1.5% since then due to the effect of the Global Financial Crisis. How much larger would Real GDP in the US be in 2017 if economic growth had continued at the same pace as before the crisis? (keep you answer in trillions of US dollars, round to two decimal places)

Answer 1

Average growth rate of real GDP before crisis = 3.3% or 0.033

Real GDP in 2007 = $15.6 trillion

Calculate the real GDP in 2017 -

Real GDP in 2017 = Real GDP in 2007 * (1+average growth rate)¹⁰

Real GDP in 2017 = $15.6 trillion * (1+0.033)¹⁰

Real GDP in 2017 = $15.6 trillion * (1.033)¹⁰

Real GDP in 2017 = $15.6 trillion * 1.3836 = $21.58 trillion

The real GDP in 2017 at pre-crisis average growth rate would be $21.58 trillion.

Thus,

At pre-crisis average growth rate, Real GDP would be larger by ($21.58 trillion - $18 trillion) $3.58 trillion in 2017.

The answer is $3.58 trillion.