Suppose a country has real GDP of $10,000 at the beginning of the year 2005. Each year the economy grows by 5 percent. By how much will GDP rise by the end of 2007?

Question

Quizplus · Accepted Answer

First, we need to find the GDP for the end of 2005, which is:
$10,000 x 1.05 = $10,500
Then, we need to find the GDP for the end of 2006, which is:
$10,500 x 1.05 = $11,025
Finally, we need to find the GDP for the end of 2007, which is:
$11,025 x 1.05 = $11,576.25

Therefore, GDP will rise by $1,576.25 at the end of 2007. Choice B is the correct answer.

Suppose a Country Has Real GDP of $10,000 at the Beginning