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Chapter 18: Q. 5 (page 412)

Suppose that every 500 billion of dead capital reduces the average rate of growth in worldwide per capita real GDP by 0.1 percentage point. If there is 10 trillion in dead capital in the world, by how many percentage points does the existence of dead capital reduce average worldwide growth of per capita real GDP?

Short Answer

Expert verified

2% of points makes the existence of dead capital reduce average worldwide growth of per capita real GDP.

Step by step solution

01

Introduction.

Annual real GDP per capita growth rate The percentage change in real GDP per capita between two consecutive years is used to compute the annual growth rate of real GDP per capita. GDP at constant prices divided by the population of a country or territory yields real GDP per capita.

Given:

Global average growth rate in real per capita income=0.1%

02

Find the average rate of growth per capita real.

Each 500billion dollars of dead capital diminishes the average rate of real GDP per capita by 0.1percent. Calculation of average real GDP per capita with 10trillion dollars in dead capital:

=10trillion0.5trillion脳0.1%=2%

FYI,

1000billion=1teillion

Therefore,

500billion=0.5trillion

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Most popular questions from this chapter

Why do you suppose that many observers regard India's agricultural productivity issues related to land use as analogous to the problems arising from dead capital?

In principle, how could a nation maintain a relatively high rate of economic growth even if it also has a relatively high rate of population growth?

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