Suppose two countries have per capita real GDP of $20,000 in 2010. Country A has a growth rate of 4 percent and Country B has a growth rate of 5 percent. By 2013, 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 2013, we need to use the compound growth formula: FV = PV x (1+g)^n, 
where FV is the future value, PV is the present value, g is the growth rate, and n is the number of years.

Using the formula for Country A:
FV = 20,000 x (1+0.04)^3 = $22,151.20 (rounded to $22,500)

Using the formula for Country B:
FV = 20,000 x (1+0.05)^3 = $22,954.56 (rounded to $23,150)

Therefore, the answer is C.

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