If GDP grows at 4.5% rather than 3.5%, over a 25 year period that would result in __ than anticipated.

Question

Quizplus · Accepted Answer

To calculate the difference between the two growth rates over 25 years, we can use the formula:
A = P(1+r)^t
Where:
A= Final GDP
P= Initial GDP
r= Annual growth rate
t= Time period in years

For the first scenario (3.5% growth):
A = P(1+0.035)^25
A = P(2.34)
A/P = 2.34

For the second scenario (4.5% growth):
A = P(1+0.045)^25
A = P(3.11)
A/P = 3.11

The difference in GDP between the two scenarios is:
3.11/2.34 = 1.326, or 32.6% more GDP than anticipated.

However, the question asks for the result in comparison to the anticipated GDP growth rate of 3.5%. Therefore, the answer would be:
3.11/2.34 - 1 = 0.328, or 32.8% more GDP than anticipated.

The closest option is B, which states 28% more GDP. However, the correct answer is 32.8% more GDP.

If GDP Grows at 4