Question

Suppose an economy's real GDP is $30,000 in year 1 and $31,200 in year 2. Instructions: In part a, enter your answer as a whole number. In part b, round your answer to 2 decimal places a. What is the growth rate of its real GDP? percent Assume that population is 100 in year 1 and 102 in year 2. b. What is the growth rate of real GDP per capita? percent

Answer 1

Economy's real GDP in year 1 = $30,000

In year 2 = $31,200

(a) Growth rate of real GDP = [(31,200-30,000)/30000]100= (1200/30000)100 = 4%

(b) Population in year 1= 100

So, real GDP per capita in year 1 = (Real GDP/Population)= (30,000/100)= 300

Population in year 2 = 102

So, real GDP per capita in year 2 = (Real GDP/ Population) = (31,200/102) = 305.88

Growth rate of real GDP per capita = [(305.88-300)/300]100 = 1.96%