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Chapter 20: Q. 33 (page 497)

An economy starts off with a GDP per capita of 12,000 euros. How large will the GDP per capita be if it grows at an annual rate of 3% for 10 years? 3% for 30 years? 6% for 30 years?

Short Answer

Expert verified

3% for 10 years- 16127 euros

3% for 30 years- 29127 euros

6% for 30 years- 68922 euros

Step by step solution

01

Step1. Introduction

The Gross Domestic Product (GDP) can be defined as the value of all the final goods and services produced in a geographical boundary during a given period.

02

Step2. Explanation

Basic formula-

(1+x%)^n * GDP

n- number of years

GDP- initial/base

3% for 10 years- 16127 euros

= (1+0.03)^10 * 12000

=16127 euros

3% for 30 years- 29127 euros

=(1+0.03)^30 * 12000

=29127 euros

6% for 30 years- 68922 euros

=(1+0.06)^30 * 12000

=68922 euros

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