If changes in economic policy could cause the growth rate of real GDP to increase by 1% per year for 100 years,then GDP would be ________% higher after 100 years than it would have been otherwise.

Question

Quizplus · Accepted Answer

The formula for calculating the future value of GDP after "n" years at a growth rate of "r" is:

FV = PV x (1 + r)^n

where PV = present value of GDP

In this case, if the growth rate of real GDP increases by 1% per year for 100 years, the future value of GDP after 100 years can be calculated as:

FV = PV x (1 + 0.01)^100 = PV x 2.7048

So GDP would be 2.7048 times higher after 100 years than it would have been otherwise.

Therefore, the answer is C) 2.7.

If Changes in Economic Policy Could Cause the Growth Rate