Question

The rate of economic growth per capita in fredonia from 2000 to 2015 was 2% per year while in konoa over the same the same period was 4%. Per capita real GDP was 25,000 in fredonia in 2015, and $12,500 in Konoa. Assume the growth rate for each country remaind the same.

Compute the doubling time for Fredonia’s per capita real GDP

Compute the doubling time for konoa’s per capita real GDP

What will fredonia’s per capita real GDP be in 2051?

What will konoa’s per capita real GDP be in 2051?

Note to the Tutor: Please be consise, clear and explanatory, will be appreciated.

Answer 1

1.

Future value = present value*(1+R)^n

50000 = 25000*(1+2%)^n

n = Log 2/Log 1.02 = 35 years

It will take 35 years to double the real GDP per capita in Fredonia.

2.

Future value = present value*(1+R)^n

25000 = 12500*(1+4%)^n

n = Log 2/Log 1.04 = 17.67 years

It will take 17.67 years to double the real GDP per capita in Kenoa.

3.

Time = 36 years ( it will take 36 year between 2015 and 2051)

In 2051,

Real GDP per capita in Fredonia = 25000*(1+2%)^36 = $50997.18

4.

Time = 36 years ( it will take 36 year between 2015 and 2051)

In 2051,

Real GDP per capita in Kenoa = 12500*(1+4%)^36 = $51299.16