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(a)
To compute:
The years taken by a country to double its output.
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Answer to Problem 1P
The years taken by a country to double its output is shown in the table below:
0.5 percent | 140 years |
1 percent | 140 years |
1.4 percent | 140 years |
2 percent | 140 years |
2.8 percent | 140 years |
3.5 percent | 140 years |
7 percent | 140 years |
Explanation of Solution
The calculation for years taken to double the annual growth rate:
By applying Rule
The number of years is calculated by dividing
1. If the growth rate is 0.5%, then
2. If the growth rate is
3. If the growth rate is
4. If the growth rate is
5. If the growth rate is
6. If the growth rate is
7. If the growth rate is
Annual growth rate:
Annual growth rate refers to the rate at which the value of an investment changes over a particular timeperiod.
Ruleof 70:
The years needed by a country to double its output at a given growth rate is calculated by the rule of 70. It is calculated or estimated by dividing 70 with the given growth rate.
(b)
To compute:
The value of real
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Answer to Problem 1P
The real GDP in 50 years when the annual growth rate is 1.4% is $200.40, for annual growth rate of 2.8% is $397.79 and for annual growth rate of 7% is $2,945.70.
Explanation of Solution
The country's real GDP is $100 billion.
Calculation for real GDP is shown below for different growth rates:
Using the compound interest formula,
Real GDP in
Real GDP in
Real GDP in
Annual growth rate:
Annual growth rate refers to the rate at which the value of an investment changes over a particular timeperiod.
Real GDP:
Real gross domestic product is defined as a measure of economic output with respect to changes in prices.It is a macro-economic measure.
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