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Per Capita Real GDP

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Part I
Consider the following data.

Country Population Real GDP
($ billions)
A 10 55
B 20 60
C 5 70

What is the per capita real GDP in each of these countries?

Part II
Now consider the following hypothetical situation:
Per capita real GDP in country L is three times as high as in country M. The economic growth rate in country M is 8 percent while country L's economy grows at a rate of 5 percent.

Use table below to determine approximately how many years will it be before per capita GDP in country M surpasses per capita real GDP in country L.

Interest Rate
Number
of Years 3% 4% 5% 6% 8% 10% 20%
1 1.03 1.04 1.05 1.06 1.08 1.10 1.20
2 1.06 1.08 1.10 1.12 1.17 1.21 1.44
3 1.09 1.12 1.16 1.19 1.26 1.33 1.73
4 1.13 1.17 1.22 1.26 1.36 1.46 2.07
5 1.16 1.22 1.28 1.34 1.47 1.61 2.49
6 1.19 1.27 1.34 1.41 1.59 1.77 2.99
7 1.23 1.32 1.41 1.50 1.71 1.94 3.58
8 1.27 1.37 1.48 1.59 1.85 2.14 4.30
9 1.30 1.42 1.55 1.68 2.00 2.35 5.16
10 1.34 1.48 1.63 1.79 2.16 2.59 6.19
20 1.81 2.19 2.65 3.20 4.66 6.72 38.30
30 2.43 3.24 4.32 5.74 10.00 17.40 237.00
40 3.26 4.80 7.04 10.30 21.70 45.30 1470.00
50 4.38 7.11 11.50 18.40 46.90 117.00 9100.00

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Solution Summary

GDP per capita is determined.

Solution Preview

Part I) recall that GDP per capita is just GDP divided by population. so for each country you would have the following...

country A) 55/10 =5.5
country B) 60/20=3
country C) 70/5=14

Part II) L=3*M, where growth rate of L = 5% and M = ...

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