The value by which real GDP grows per year.

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Chapter 25, Problem 2MCQ

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The value by which real GDP grows per year.

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1. Growth experiences Small differences in the rate of economic growth can lead to large differences in living standards. Consider two countries: Upper Richistan and Lower Richistan. Currently, real GDP per person (average income) is $55,000 in Upper Richistan and $13,750 in Lower Richistan. Suppose you want to project what the real GDP per person will be in each country 100 years from now. The following formula shows how to compute the average income in ŉ years, where g represents the growth rate of real GDP per person (in decimal form-that is, 1.2% is entered as 0.012): Average Income in n Years = Current Average Income × (1 + g)' n Use the growth formula to find the correct amounts to select to fill in the following table. Growth Rate Average Income after 100 Years (Percent) (Dollars) 1.2 1.6 4 4.3 Suppose Upper Richistan's growth rate is expected to grow at 1.2% and remain there for the next 100 years. Which of the following growth rates in Lower Richistan would cause the average…