Real GDP per person in both Alpha and Omega is equal to $2,000. Over the next 100 years, real GDP per person grows at a 1 percent annual rate in Alpha and at a 2 percent annual rate in Omega. After 100 years, real GDP per person in Alpha is ________ smaller than real GDP per person in Omega.

Question

Quizplus · Accepted Answer

For Alpha, the future value equation is: Future GDP = $2,000 × (1.01)¹⁰⁰ = $5,409.6. For Omega, the future value equation is: Future GDP = $2,000 × (1.02)¹⁰⁰ = $14,489.3. The difference is $9,079.7 or $9,080.

Real GDP Per Person in Both Alpha and Omega Is