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Calculate the level of output after four years if initial output equals
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Explanation of Solution
Calculate the output for
Given,
Initial output as
Growth rate:
Now,
Multiply initial year output with growth of rate per year
Then,
Add previous year output with growth rate of current year.
That is,
Growth | Amount |
Initial output | |
Growth rate at the end of First year | |
Level of output at the end of first year | |
Growth rate at the end of second year | |
Level of output at the end of second year | |
Growth rate at the end of third year | |
Level of output at the end of third year | |
Growth rate at the end of fourth year | |
Level of output at the end of fourth year | |
Therefore, the level of output at the end of fourth year is
To calculate the value of growth at the end of first year:
Multiply initial year output with growth of rate per year.
That is,
Growth at the end of the year is
Similarly
Calculate the level of output for
Therefore, the level of output at the end of fourth year is
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Macroeconomics (MindTap Course List)
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