Question

The rate of economic growth per capita in France from 1996 to 2000 was 1.9% per year, while in Korea over the same period it was 4.2%. Per capita real GDP was $28,900 in France in 2003, and $12,700 in Korea. Assume the growth rates for each country remain the same.

(1) Compute the doubling time for France’s per capita real GDP.

(2) Compute the doubling time for Korea’s per capita real GDP.

(3) What will France’s per capita real GDP be in 2045?

(4) What will Korea’s per capita real GDP be in 2045?

Answer 1

(1) Compute the doubling time for France’s per capita real GDP

FV=PV*(1+r)^n

(28900*2)=28900*(1+1.9%)^n

1.019^n=2

take natural log

n=ln(2)/ln(1.019)=36.83 years is answer

(2) Compute the doubling time for Korea’s per capita real GDP.

FV=PV*(1+r)^n

(12700*2)=12700*(1+4.2%)^n

1.042^n=2

take natural log

n=ln(2)/ln(1.042)=16.85 years is answer

(3) What will France’s per capita real GDP be in 2045=28900*(1+1.9%)^42=63710.88

(4) What will Korea’s per capita real GDP be in 2045=12700*(1+4.2%)^42=71490.43

the above is answer..