# Importance of Economic Growth

1. Consider the formula P = 67.38 ? (1.026)t. If we let P represent the population

of Mexico in year t where t is the number of years from 1980.

The following table gives the estimated population (in millions) of Mexico for the

years 1980 to 1986.

Year Population in Millions

1980 67.38

1981 69.13

1982 70.93

1983 72.77

1984 74.66

1985 76.60

1986 78.59

What would the population in 1990 have been if growth had continued in

this same pattern?

2. Why is economic growth important? Why could the difference between a 2.5 percent and a 3 percent annual growth rate be of great significance over several decades?

3. Suppose an economy's real GDP is $30,000 in year 1 and $31,200 in year 2. What is the growth rate of its real GDP? Assume that population is 100 in year 1 and 102 in year 2. What is the growth rate of GDP per capita?

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#### Solution Preview

Consider the formula P = 67.38 ? (1.026)t. If we let P represent the population

of Mexico in year t where t is the number of years from 1980.

The following table gives the estimated population (in millions) of Mexico for the

years 1980 to 1986.

Year Population in Millions

1980 67.38

1981 69.13

1982 70.93

1983 72.77

1984 74.66

1985 76.60

1986 78.59

What would the population in 1990 have been if growth had continued in

this same pattern?

For this we will find out the CAGR growth rate.

CAGR Growth= 2.60% ((Current ...

#### Solution Summary

This discusses the importance of Economic Growth