Suppose real GDPs in Hauck and Meran are identical at $10 trillion in 2000.Suppose Hauck's economic growth rate is 2% and Meran's is 4% and the rates remain constant over time.Calculate the percentage difference in their levels of potential output in 2036.

Question

Quizplus · Accepted Answer

Using the rule of 72, we can calculate the number of years it takes for the GDP to double. For Hauck, it takes 36 years (72/2=36) for the GDP to double, and for Meran, it takes 18 years (72/4=18) for the GDP to double. Therefore, in 2036, Hauck's GDP will have grown by a factor of 2 (100% increase) while Meran's GDP will have grown by a factor of 4 (300% increase). Thus, Meran's potential output will be 100% higher than that of Hauck's.

Suppose Real GDPs in Hauck and Meran Are Identical at $10