Question

	Current Year	Previous Year	Growth Rate
Real GDP	$8.4 trillion	$8.0 trillion
Population	202 million	200 million
GDP per Capita	$	$

Formulas you could use:

- Growth Rate in percentage = (Current year value - previous year value)/ previous year

- GDP per Capita = Real GDP/population (Ch6 Section 6.4)

- Future value = Present value x(1+ growth rate )^number of years (Ch7 Section 7.2)

- Rule of 72 :

- 72 / growth rate = number of years to double the actual value (Ch19 Section19.2)

The table above is the data for country D, a developed country.

1. (2 points) Calculate the annual growth rate of Real GDP for country D.

2. (2 points) Calculate the annual growth rate of population.

3. (2 points) Calculate GDP per Capita for the current year and previous year.

4. (2 points) What is the annual growth rate of GDP per Capita? How do you find it?

5. (2 points) How do real GDP growth and population growth affect GDP per capita growth?

6. (2 points) Using your calculated figure in (4), calculate the amount of GDP per capita (future value) after 18 years.

7. (2 points) Using the rule of 72 , calculate how many years GDP per capita will be double.

8. (2 points) Now we have country E, an emerging country. Country E starts off with a GDP per capita of $ 4,000, and is experiencing a GDP per capita growth rate of 12 %, how many years GDP per capita will be double for country E?

9. (2 points) After 18 years, is there an economic convergence between country D and country E? How many times of GDP per capita country D is larger than country E before and after?

Answer 1

Question 1

Real GDP current year = $8.4 trillion

Real GDP previous year = $8.0 trillion

Calculate the annual growth rate of the real GDP -

Annual growth rate = [(Real GDP current year - Real GDP previous year)/Real GDP previous year] * 100

Annual growth rate = [($8.4 trillion - $8 trillion)/$8 trillion] * 100

Annual growth rate = [$0.4 trillion/$8 trillion] * 100

Annual growth rate = 5%

Thus,

The annual growth rate of the real GDP for country D is 5%

Question 2

Population in current year = 202 million

Population in previous year = 200 million

Calculate the annual growth rate of population -

Annual growth rate = [(Population in current year - Population in previous year)/Population in previous year] * 100

Annual growth rate = [(202 million - 200 million)/200 million] * 100

Annual growth rate = [2 million/200 million] * 100

Annual growth rate = 1%

Thus,

The annual growth rate of population is 1%

Question 3

Real GDP in current year = $8.4 trillion

Population in current year = 202 million

Calculate the GDP per capita -

GDP per capita = Real GDP in current year/Population in current year

GDP per capita = $8.4 trillion/202 million = $41,584.16

The GDP per capita for the current year is $41,584.16

GDP in previous year = $8.0 trillion

Population in previous year = 200 million

Calculate the GDP per capita -

GDP per capita = Real GDP in current year/Population in current year

GDP per capita = $8.0 trillion/200 million = $40,000

The GDP per capita for the previous year is $40,000

Question 4

The annual growth rate of GDP per capita can be calculated by subtracting the annual growth rate of population from the annual growth rate of real GDP.

Calculate the annual growth rate of GDP per capita -

Annual growth rate = Annual growth rate of real GDP - Annual growth rate of population

Annual growth rate = 5% - 1% = 4%

Thus,

The annual growth rate of GDP per capita is 4%.