Countries A and B start out with real GDP equal to $1,000.If country A grows at a rate of 5% while country B grows at a rate of 10%,what is country A's level of real GDP after 3 years?

Question

Quizplus · Accepted Answer

After 1 year, the real GDP of country A is $1,000 x 1.05 = $1,050
After 1 year, the real GDP of country B is $1,000 x 1.10 = $1,100

After 2 years, the real GDP of country A is $1,050 x 1.05 = $1,102.50
After 2 years, the real GDP of country B is $1,100 x 1.10 = $1,210

After 3 years, the real GDP of country A is $1,102.50 x 1.05 = $1,157.63
After 3 years, the real GDP of country B is $1,210 x 1.10 = $1,331

Therefore, country A's level of real GDP after 3 years is $1,157.63 which is closest to answer choice C.

Countries a and B Start Out with Real GDP Equal