Small differences in economic growth rates can lead to large differences in standards of living. Why is this the case?

Question

Quizplus · Accepted Answer

Small differences in growth rates compound over time, leading to significant differences in real GDP per capita. For example, if one economy grows at 2% per year and another grows at 3% per year, after 25 years the second economy will have a real GDP per capita that is 22% higher than the first economy. After 50 years, the difference will be 51%. Therefore, the cumulative effects of small differences in growth rates can lead to large disparities in standards of living.

Small Differences in Economic Growth Rates Can Lead to Large