If our economy is growing at a constant rate of 5 percent per year, then over a period of 10 years we would expect to see which of the following?
A) Nice, steady flat-line growth
B) An upward sloping growth path
C) A downward sloping growth path
D) It is impossible to say what kind of growth path we would see.

Question

Quizplus · Accepted Answer

If the economy is growing at a constant rate of 5 percent per year, we would expect to see an upward sloping growth path over a period of 10 years. This is because 5 percent growth each year would compound, leading to a higher level of economic activity each subsequent year. Therefore, option (B) is the correct answer.

If Our Economy Is Growing at a Constant Rate of 5