Question

Please answer the following questions. SHOW YOUR WORK (Show any calculations or derivations that allow you to find the right answer). 1. How large will Canada's GDP be in 25 years? The answer depends on what the rate of growth in GDP will be over the 25-year period. A mathematical formula we can use for this calculation is the following GDP2044 = GDP2019(1 + g)25 Where GDP2044 is the level of GDP in the year 2044, GDP2019 is the level of GDP in the year 2019, and g is the rate of growth in GDP. Assume that GDP in 2019 is $1,000 million and assume that the value of g is 0.035 (3.5% per year). What will be the value of GDP in 2044 given this slightly larger have only been 0.015 (1.5%) rate of growth? And what would have been the value of GDP in 2044 if g would

Answer 1

PART A

GDP in 2009 = $1,000 million

Annual growth rate (g) = 3.5% or 0.035

Calculate the value of GDP in 2044 -

GDP₂₀₄₄ = GDP₂₀₁₉ (1+g)²⁵

GDP₂₀₄₄ = $1,000 million (1+0.035)²⁵

GDP₂₀₄₄ = $1,000 million * (1.035)²⁵

GDP₂₀₄₄ = $1,000 million * 2.3632 = $2,363.2 million

Thus,

The value of GDP in 2044 will be $2,363.2 million.

PART B

GDP in 2009 = $1,000 million

Annual growth rate (g) = 1.5% or 0.015

Calculate the value of GDP in 2044 -

GDP₂₀₄₄ = GDP₂₀₁₉ (1+g)²⁵

GDP₂₀₄₄ = $1,000 million (1+0.015)²⁵

GDP₂₀₄₄ = $1,000 million * (1.015)²⁵

GDP₂₀₄₄ = $1,000 million * 1.4509 = $1,450.9 million

Thus,

The value of GDP in 2044 will be $1,450.9 million.