Q. 10 If trade increases world GDP by ... [FREE SOLUTION]

Chapter 33: Q. 10 (page 806)

If trade increases world GDP by 1% per year, what is the global impact of this increase over 10 years? How does this increase compare to the annual GDP of a country like Sri Lanka? Discuss. Hint: To answer this question, here are steps you may want to consider. Go to the World Development Indicators (online) published by the World Bank. Find the current level of World GDP in constant international dollars. Also, find the GDP of Sri Lanka in constant international dollars. Once you have these two numbers, compute the amount the additional increase in global incomes due to trade and compare that number to Sri Lanka鈥檚 GDP.

Expert verified

The World GDP PPP in constant international dollars is $88.825 billions.

The GDP PPP of Sri Lanka in constant international dollars is $88.832 billions. The World GDP would grow to $98.118 billions.

This growth is equal to 1.10 times the GDP of Sri Lanka.

GDP or gross domestic product can be defined as the value of total volume of final goods and services produced in an economy in a year.

The World GDP PPP in constant international dollars is $88.825 billions.

The GDP PPP of Sri Lanka in constant international dollars is $88.832 billions.

Suppose, trade contributes to 1% growth in world GDP per year. Then the effect on GDP after 10 years can be obtained as,

$$ 88.825 billions 脳 {(1 + 0.01)}^{10} = $ 98.118 b i l l i o n s$

As compared to the annual GDP of Sri Lanka, this increase is 1.10 times the GDP of Sri Lanka.

$\frac{98.118}{88.832} = 1.10$

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