Consider the following two scenarios. Scenario 1 - Uninterrupted Growth Per capita GDP starts at $823 and grows by 6.1% each year for 4 years. Then it continues to grow at 6.1% for 61 more years. Scenario 2 - A Depression Before Growth Per capita GDP starts at $823 but a recession lasting for 4 years shrinks GDP per capita by 20% for each of those years. Then the economy recovers and grows by 6.1% for the next 61 years. How much lower is per capita GDP at the end of Scenario 2 compared to Scenario 1?
Consider the following two scenarios. Scenario 1 - Uninterrupted Growth Per capita GDP starts at $823 and grows by 6.1% each year for 4 years. Then it continues to grow at 6.1% for 61 more years. Scenario 2 - A Depression Before Growth Per capita GDP starts at $823 but a recession lasting for 4 years shrinks GDP per capita by 20% for each of those years. Then the economy recovers and grows by 6.1% for the next 61 years. How much lower is per capita GDP at the end of Scenario 2 compared to Scenario 1?
Chapter20: Economic Growth In The Global Economy
Section: Chapter Questions
Problem 2P
Related questions
Question
4
![Question 10
Consider the following two scenarios.
Scenario 1 - Uninterrupted Growth
Per capita GDP starts at $823 and grows by 6.1% each year for 4 years. Then it continues to grow at
6.1% for 61 more years.
Scenario 2 - A Depression Before Growth
Per capita GDP starts at $823 but a recession lasting for 4 years shrinks GDP per capita by 20% for
each of those years. Then the economy recovers and grows by 6.1% for the next 61 years.
How much lower is per capita GDP at the end of Scenario 2 compared to Scenario 1?
Note: If the Great Depression never happened, and the U.S. experienced normal growth over those years
instead, GDP per capita today might be as high as $180,000. Since our GDP per capita is more like
$60,000 today, that means we have $120,000 less per person today because of the Depression. So, with
those numbers, my answer to this question would be "120,000".
TL;DR - Enter your answer as a positive number, not a negative one.
Round your final answer to two decimal places.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F2f9e23c3-dc40-4119-9fdb-35285dfd5865%2F9f9127ab-b7d1-4371-a379-0683e94306e0%2Ff2wuhvt_processed.png&w=3840&q=75)
Transcribed Image Text:Question 10
Consider the following two scenarios.
Scenario 1 - Uninterrupted Growth
Per capita GDP starts at $823 and grows by 6.1% each year for 4 years. Then it continues to grow at
6.1% for 61 more years.
Scenario 2 - A Depression Before Growth
Per capita GDP starts at $823 but a recession lasting for 4 years shrinks GDP per capita by 20% for
each of those years. Then the economy recovers and grows by 6.1% for the next 61 years.
How much lower is per capita GDP at the end of Scenario 2 compared to Scenario 1?
Note: If the Great Depression never happened, and the U.S. experienced normal growth over those years
instead, GDP per capita today might be as high as $180,000. Since our GDP per capita is more like
$60,000 today, that means we have $120,000 less per person today because of the Depression. So, with
those numbers, my answer to this question would be "120,000".
TL;DR - Enter your answer as a positive number, not a negative one.
Round your final answer to two decimal places.
Expert Solution
![](/static/compass_v2/shared-icons/check-mark.png)
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
Step by step
Solved in 2 steps with 2 images
![Blurred answer](/static/compass_v2/solution-images/blurred-answer.jpg)
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, economics and related others by exploring similar questions and additional content below.Recommended textbooks for you
![Exploring Economics](https://www.bartleby.com/isbn_cover_images/9781544336329/9781544336329_smallCoverImage.jpg)
Exploring Economics
Economics
ISBN:
9781544336329
Author:
Robert L. Sexton
Publisher:
SAGE Publications, Inc
![Principles of Economics 2e](https://www.bartleby.com/isbn_cover_images/9781947172364/9781947172364_smallCoverImage.jpg)
Principles of Economics 2e
Economics
ISBN:
9781947172364
Author:
Steven A. Greenlaw; David Shapiro
Publisher:
OpenStax
![Economics:](https://www.bartleby.com/isbn_cover_images/9781285859460/9781285859460_smallCoverImage.gif)
![Exploring Economics](https://www.bartleby.com/isbn_cover_images/9781544336329/9781544336329_smallCoverImage.jpg)
Exploring Economics
Economics
ISBN:
9781544336329
Author:
Robert L. Sexton
Publisher:
SAGE Publications, Inc
![Principles of Economics 2e](https://www.bartleby.com/isbn_cover_images/9781947172364/9781947172364_smallCoverImage.jpg)
Principles of Economics 2e
Economics
ISBN:
9781947172364
Author:
Steven A. Greenlaw; David Shapiro
Publisher:
OpenStax
![Economics:](https://www.bartleby.com/isbn_cover_images/9781285859460/9781285859460_smallCoverImage.gif)
![Managerial Economics: A Problem Solving Approach](https://www.bartleby.com/isbn_cover_images/9781337106665/9781337106665_smallCoverImage.gif)
Managerial Economics: A Problem Solving Approach
Economics
ISBN:
9781337106665
Author:
Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
Publisher:
Cengage Learning