-Refer to the above table. Country A has a per capita real GDP of $1000 and B has a per capita real GDP of $10,000. A is growing at a rate of 5 percent a year and B at a rate of 4 percent a year. After 50 years, how much larger is per capita real GDP in B than A? How much is this in real dollars?
A) B is 8 times larger, or $175,000 larger on a real per capita basis.
B) B is 12 times larger, or $230,000 larger on a real per capita basis.
C) B is a little over 6 times larger, or almost $60,000 larger on a real per capita basis.
D) B is a little less than 2 times smaller, or almost $20,000 smaller on a real per capita basis.

Question

-Refer to the above table. Country A has a per capita real GDP of $1000 and B has a per capita real GDP of $10,000. A is growing at a rate of 5 percent a year and B at a rate of 4 percent a year. After 50 years, how much larger is per capita real GDP in B than A? How much is this in real dollars?
A) B is 8 times larger, or $175,000 larger on a real per capita basis. 
B) B is 12 times larger, or $230,000 larger on a real per capita basis. 
C) B is a little over 6 times larger, or almost $60,000 larger on a real per capita basis. 
D) B is a little less than 2 times smaller, or almost $20,000 smaller on a real per capita basis.

Quizplus · Accepted Answer

To calculate the future per capita real GDP for both countries, we use the formula for compound growth: Future Value = Present Value * (1 + growth rate)^number of periods. For Country A: $1000 * (1 + 0.05)^50 = $11,467.40. For Country B: $10,000 * (1 + 0.04)^50 = $70,400.24. The difference is $70,400.24 - $11,467.40 = $58,932.84, which is a little over 6 times larger and almost $60,000 larger on a real per capita basis.

-Refer to the Above Table