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Per Capita Real GDP

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 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 = ...

Solution Summary

GDP per capita is determined.

$2.19