Real GDP per person is $30,000 in Country A, $20,000 in Country B, and $11,000 in...
Real GDP per person is $30,000 in Country A, $20,000 in Country B, and $11,000 in Country C. Saving per person is $1,000 in all three countries. Which country will grow the fastest? Why?
Homework Answers
Real GDP per person means the total economic output of a country divided by the total population and adjusted for inflation or deflation. It is basically used to determine the standard of living of the people between the countries over a particular period of time.
According to the data given, we can tell that the standard of living in country A is the highest and Country C has the lowest standard of living. Every person in all 3 countries have $1000 savings. Now, this saving will be used to invest which will further contribute to the GDP of the country as investment is one of the components of the GDP.
Country C will grow the fastest as the read GDP is the lowest and saving to GDP ratio is the highest. $1000 of savings/investment will lead to 9% increase in the GDP. For country A, it is only 3.33%
It is assumed that the population of all 3 countries is the same.
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