Question

Answer the following questions. Instructions: Enter your responses rounded to the nearest dollar. a. How much more output does the $20 trillion U.S. economy produce when GDP increases by 1.0 percent? $ billion b. By how much does this increase per capita income if the U.S. population is 340 million?

Answer 1

1)

Increase in GDP=1.0%

Current GDP=$20 trillion

Increase in Output=20*1%=$0.2 trillion

Output will increase by $0.2 trillion  

2)

Current Income=$20 billion=$20,000,000 million

US Population=340 million

Current per capita income level=Current income/Population=20000000/340=$58,823.53

New income=$(20+0.2) trillion=$20200000 million

New per capita income level=Current income/Population=(20200000/340)=$59411.76

Increase in per capita income=59411.76-58823.53=$588.23

Per capita income will increase by $588.23 following a 1% increase in GDP