Suppose two countries have per capita real GDP of $20,000 in 2015. Country A has a growth rate of 4 percent and Country B has a growth rate of 5 percent. By 2018, the per capita real GDPs for the two countries, respectively, are (rounded)
A) $21,630 and $22,050.
B) $22,400 and $23,000.
C) $22,500 and $23,150.
D) $25,000 and $26,500.

Question

Quizplus · Accepted Answer

To calculate the per capita real GDP in 2018, we need to use the formula:

Per capita real GDP in 2018 = Per capita real GDP in 2015 x (1 + Growth rate)^(Number of years)

For Country A, the per capita real GDP in 2018 is:

$20,000 x (1 + 0.04)^3 = $22,499.20 (rounded to $22,500)

For Country B, the per capita real GDP in 2018 is:

$20,000 x (1 + 0.05)^3 = $23,146.25 (rounded to $23,150)

Therefore, the answer is C.

Suppose Two Countries Have Per Capita Real GDP of $20,000