Question

1.You deposit $600 in a savings account and one year later you have $654. At the same time, the CPI increases from 160 to 166.4. The nominal interest rate is

2.

A country aims to double real GDP per capita in the next 24 years. If the rate of population growth in the country is 1.01% per year then at approximately what rate does real GDP need to grow to achieve this goal?

Enter a number rounded to two decimal places. Do not enter a percent sign.

3.In 1988 the value of RGDP was $8,977.43 billion and the population was 299.41 million. What was the value of real GDP per capita? Round to the nearest whole number. Do not enter a dollar sign.

Answer 1

1) Nominal interest rate doesn't take account the inflation ( real interest rate does).

So nominal interest earned during year=654-600=54

Nominal interest rate=54/600]*100=54/6=9%

2)Real gdp per capita= real gdp/ population

So grown rate of real gdp per capita (approximation)= growth rate of real gdp- growth rate of population

Using rule of 70, any variable double with constant growth rate in years=70/ yearly growth rate

24=70/ yearly growth rate

Yearly growth rate=70/24=2.9

2.9= growth rate of real gdp- growth rate of population

2.9=growth rate of real gdp -1.01

Growth rate of real gdp=2.9+1.01=3.91

So real gdp needa to grow approx 3.9% to double real gdp per capita in 24 years.

3)real gdp per capita= real gdp/ population

1 billion= 1000 million,so

Real gdp=8977.43*1000=8,977,43

Real gdo per capita= 8,977,430/299.41=29,983.73~29,984