Chapter 23, Problem 1SPA

(a)

To determine

Estimate the value of the growth rate of real GDP.

Explanation of Solution

The growth rate of real GDP:

The growth rate of real GDP can be calculated using the following formula:

$\text{Growth rate of real GDP=}\left(\frac{{\text{Real GDP}}_{2017}-{\text{Real GDP}}_{2016}}{{\text{Real GDP}}_{2016}}\right)$        (1)

The growth rate of real GDP:

If the 2016 real GDP is 14,461 billion and 2017 real GDP is 14,702 billion, then the value of the growth rate of real GDP can be calculated using the following formula:

$\begin{array}{c}\text{Growth rate of real GDP=}\left(\frac{14,702-14,461}{14,461}\right)\times 100\\ =\left(\frac{14,702-14,461}{14,461}\right)\times 100\\ =\left(\frac{241}{14,461}\right)\times 100\\ =0.0166\\ =1.66\end{array}$

Thus, the value of the growth rate of real GDP is 1.7%.

(b)

To determine

Estimate the value of the growth rate of real GDP per person.

Explanation of Solution

Country M’s population growth:

If country M’s population in 2016 is 121 million and 122 million in 2017, then the population growth rate can be calculated using Equation (1) as follows:

$\begin{array}{c}\text{Population growth rate}=\left(\frac{{\text{Population}}_{2017}-{\text{Population}}_{2016}}{{\text{Population}}_{2016}}\right)\times 100\\ =\left(\frac{122-121}{121}\right)\times 100\\ =\left(\frac{1}{121}\right)\times 100\\ =0.826\end{array}$

Thus, the value of Country M’s population growth rate is 0.8%

Growth rate of real GDP per person:

The growth rate of real GDP per person can be calculated as follows:

$\begin{array}{c}\text{Growth rate of real GDP per person}=\text{Growth rate of real GDP}-\text{Population growth rate}\\ =1.7-0.8\\ =0.9\end{array}$

Thus, the value of the growth rate of real GDP per person is 0.9%.

(c)

To determine

Estimate the approximate number of years to double the real GDP.

Explanation of Solution

The approximate number of years to double the real GDP can be calculated as follows:

 $\begin{array}{c}\text{Number of years to double=}\frac{\text{70}}{\text{Real GDP per person}}\\ =\frac{70}{0.9}\\ =77.78\end{array}$

Thus, the approximate number of years to double the real GDP per person is 77.8 years.