Suppose that in 1960 Japan had an initial per capita GDP of $12,000 per year and China had a per capita GDP of $5,000. But China is growing at 5 percent per year and Japan is growing at 3 percent per year. ________ is richer in 2010 with a per capita GDP of approximately ________.
A) Japan; $5,000
B) Japan; $31,500
C) China; $7,500
D) China; $73,500
E) Not enough information is given.

Question

Quizplus · Accepted Answer

Using the formula for compound interest, we can find the per capita GDP for each country in 2010:

Japan: $12,000 x (1.03)^50 = $31,516.95 
China: $5,000 x (1.05)^50 = $73,466.84

Therefore, China is richer in 2010 with a per capita GDP of approximately $73,500.

Suppose That in 1960 Japan Had an Initial Per Capita