In Techland, from 1980 to 2010, holding technology and human capital fixed, increasing physical capital per worker from $25,000 to $100,000 would have led to a doubling of real GDP per worker, from $40,000 to $80,000. However, not only did physical capital per worker increase from $25,000 to $100,000, but technological progress shifted the productivity curve upward so that real GDP per worker actually increased from $40,000 to $320,000. What was the annual growth rate of real GDP per capita in Techland?

Question

Quizplus · Accepted Answer

To find the annual growth rate of real GDP per capita, we need to use the following formula:

Annual Growth Rate = ((Ending Value / Beginning Value)^(1/Number of Years)) - 1

In this case, the beginning value of real GDP per worker is $40,000 and the ending value is $320,000. The number of years is 30 (from 1980 to 2010).

Annual Growth Rate = (($320,000/$40,000)^(1/30)) - 1 = 0.07 or 7%

Therefore, the correct answer is C) 7%.

In Techland, from 1980 to 2010, Holding Technology and Human