Assume that Mexico's average annual per capita GDP growth rate is 3 percent per year, while Argentina's is 2.5 percent. Next, assume that both countries began with an initial per capita GDP of $1,000 in 1960. By 2010, per capita GDP would have been ________ in Mexico and ________ in Argentina.

Question

Quizplus · Accepted Answer

We can use the formula for compounding growth rate to calculate the per capita GDP:

For Mexico: 
Initial GDP = $1,000
Growth rate = 3%
Number of years = 50 (2010-1960)

Per capita GDP in Mexico = $1,000*(1+0.03)^50 = $4,384

For Argentina: 
Initial GDP = $1,000
Growth rate = 2.5%
Number of years = 50 (2010-1960)

Per capita GDP in Argentina = $1,000*(1+0.025)^50 = $3,437

Therefore, the answer is D) $4,384; $3,437.

Assume That Mexico's Average Annual Per Capita GDP Growth Rate