Chapter 7R, Problem 3FRQ

a)

To determine

The years that would take the country U economy to double.

Explanation of Solution

According to rule 70, the years that would take the country U economy to double would be determined by diving 70 by the annual growth rate of the country U.

In the country U, the percentage growth rate is 1.7; therefore, the economic growth will be doubled:

  $\begin{array}{l}=\frac{70}{1.7}\\ =41.18\end{array}$

It means the country will take 41 years to double the economy.

Economics Concept Introduction

Introduction: By dividing 70 by the growth rate of the variable, the rule of 70 can be used to calculate how long it will take for a variable to double.

b)

To determine

The years that India would take to double its GDP per capita.

Explanation of Solution

According to rule 70, the years that would take country I’s economy to double its GDP per capita would be determined by diving 70 by the annual growth rate of the country.

In country I, the percentage growth rate is 4.5; therefore, the GDP per capita will be doubled:

  $\begin{array}{l}=\frac{70}{4.5}\\ =15.5\end{array}$

It means the country will take 15 years and 6 months to double its GDP per capita.

Economics Concept Introduction

Introduction: By dividing 70 by the growth rate of the variable, the rule of 70 can be used to calculate how long it will take for a variable to double.

c)

To determine

The LRAS curves that show the change in country Z’s economy from 1980 to 2016.

Explanation of Solution

The graph of long-run aggregate supply curves (LRAS) of the country Z would be shown as:

  

The economic growth rate of country Z declined from 1980 to 2016. LRAS₁ on the graph shows the rate in 1980 which is 14.4% and LRAS₂ represent the rate of year 2016 which is negative 0.1%.

Economics Concept Introduction

Introduction: The long run is the time span in macroeconomics during which the overall price level, wage rates, and expectations fully conform to the status of the economy.