A one percentage point in the growth rate
A) does not make much difference in the long run per capita real GDP.
B) will not influence the real standard of living in a country.
C) can make a big difference in the per capita real GDP because of urban congestion.
D) can make a big difference in the per capita real GDP because of compounding.

Question

Quizplus · Accepted Answer

A one percentage point increase in growth rate can have a compounding effect over time, resulting in a significant difference in per capita real GDP. For example, if a country's real GDP is growing at 2% per year, it would double in about 35 years. However, if that growth rate increases to 3% per year, it would only take around 23 years for the real GDP to double. This would result in a significant difference in the per capita real GDP.

A One Percentage Point in the Growth Rate