Refer to Table 4.3 “The Model’s Prediction for Per Capital GDP” on page 83. Why is the “observed per capita GDP” in the last column 1.000 for the U.S.?A. The U.S. per capita GDP was $1,000 in real terms for the year given in the table B. It means the U.S. economy produces 100% of what it’s supposed to produce C. It means the U.S. economy uses 100% of all available capital in the country D. U.S. values are set, or normalized, to 1 while the other countries’ values are all relative to the U.S. values TABLE 4.3The Model's Prediction for Per Capita GDP (U.S. = 1)Predicted percapita GDPy = k¹1/3CountryU.S.SwitzerlandJapanU.K.ItalySpainChinaBrazilSouth AfricaIndiaBurundiObservedcapital perperson, k1.0001.3090.9300.6930.8040.7310.2760.2020.1740.0810.0051.0001.0940.9760.8850.9300.9010.6510.5870.5590.4330.173Observedper capitaGDP1.0001.1510.7340.7140.6800.6400.2790.2520.2140.1170.015Predicted per capita GDP is computed as R13, that is, assuming no differences in productivity across countries. Datacorrespond to the year 2017 and are divided by the values for the United States.Source: Penn World Tables, Version 9.1.With no difference inproductivity, the modelpredicts smaller differ-ences in income acrosscountries than weobserve.

GDP: GDP is the sum of the value of all end commodities produced within the country in a year. The…

Answered: efer to Table 4.3 “The Model’s…

ENGR.ECONOMIC ANALYSIS

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Chapter1: Making Economics Decisions

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Refer to Table 4.3 “The Model’s Prediction for Per Capital GDP” on page 83. Why is the “observed per capita GDP” in the last column 1.000 for the U.S.?

A. The U.S. per capita GDP was $1,000 in real terms for the year given in the table
B. It means the U.S. economy produces 100% of what it’s supposed to produce
C. It means the U.S. economy uses 100% of all available capital in the country
D. U.S. values are set, or normalized, to 1 while the other countries’ values are all relative to the U.S. values

TABLE 4.3
The Model's Prediction for Per Capita GDP (U.S. = 1)
Predicted per
capita GDP
y = k¹1/3
Country
U.S.
Switzerland
Japan
U.K.
Italy
Spain
China
Brazil
South Africa
India
Burundi
Observed
capital per
person, k
1.000
1.309
0.930
0.693
0.804
0.731
0.276
0.202
0.174
0.081
0.005
1.000
1.094
0.976
0.885
0.930
0.901
0.651
0.587
0.559
0.433
0.173
Observed
per capita
GDP
1.000
1.151
0.734
0.714
0.680
0.640
0.279
0.252
0.214
0.117
0.015
Predicted per capita GDP is computed as R13, that is, assuming no differences in productivity across countries. Data
correspond to the year 2017 and are divided by the values for the United States.
Source: Penn World Tables, Version 9.1.
With no difference in
productivity, the model
predicts smaller differ-
ences in income across
countries than we
observe.

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