If real GDP per capita in Ireland is estimated to be $7,400 in 2012, what will real GDP per capita be in 2017 if real GDP per capita grows at an annual rate of 2.8%?
A)$7,607
B)$8,496
C)$9,472
D)$20,720
E)$21,375

Question

Quizplus · Accepted Answer

We can use the formula for calculating compound interest:

A = P(1 + r/n)^(n*t)

Where:
A = final amount
P = initial amount (known as present value)
r = annual rate of growth (as a decimal)
n = number of times per year the growth is compounded
t = number of years

In this case, let's assume that the initial real GDP per capita (P) is $7,400 in 2012, and the annual rate of growth (r) is 2.8%. We want to find the final amount (A) in 2017, so we need to calculate for t = 5 (since we are comparing 2012 to 2017).

A = $7,400(1 + 0.028/1)^(1*5)
A = $7,400(1.028)^5
A = $8,495.73

Therefore, real GDP per capita in Ireland is estimated to be $8,496 in 2017. The best choice is B.

If Real GDP Per Capita in Ireland Is Estimated to Be