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(a) A country's current GDP is $1,000. Its annual growth rate is expected to average 5% over the next 10 years. What's its expected GDP in 10 years?

(a) A country's current GDP is $1,000. Its annual growth rate is expected to average 5% over the next 10 years. What's its expected GDP in 10 years?

ENGR.ECONOMIC ANALYSIS
ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN:9780190931919
Author:NEWNAN
Publisher:NEWNAN
Chapter1: Making Economics Decisions
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2. (a) A country's current GDP is $1,000. Its annual growth rate is expected to average 5% over the next 10 years. What's its expected GDP in 10 years? 70 -=14years to double the GDP to $2000. In 10 years, GDP will be: 5 2000 × 14 10 ¿$1,428
Transcribed Image Text:2. (a) A country's current GDP is $1,000. Its annual growth rate is expected to average 5% over the next 10 years. What's its expected GDP in 10 years? 70 -=14years to double the GDP to $2000. In 10 years, GDP will be: 5 2000 × 14 10 ¿$1,428
Expert Solution
Step 1

We use the formula for compounding to know what will the GDP be after 10 years:

The formula used is:

Expected GDP = GDP1+r100nwhere r is the interest rate and n is the number of years

 

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