Why do very small differences in annual growth rates amount to big differences in the degree of long-term economic growth?
A) Because the faster-growing countries gain a political advantage over poorer countries, and use that advantage for their economic gain.
B) Because the annual growth rate is compounded over time.
C) Because the slower-growing countries save too much.
D) Because the slower-growing countries don't export enough.

Question

Quizplus · Accepted Answer

The annual growth rate is compounded over time, leading to big differences in the degree of long-term economic growth. Small differences in growth rates can lead to significant differences in economic outcomes over decades or even centuries. For example, at a growth rate of 1%, an economy would double in size in 70 years, but at a growth rate of 2%, it would double in size in only 35 years. Therefore, even very small differences in annual growth rates can lead to big differences in economic outcomes over the long-term.

Why Do Very Small Differences in Annual Growth Rates Amount