Question

Assume an economy whose real GDP per capita is growing at a constant rate over a 35-year period doubles in size at the end of that period. What must the growth rate of real GDP per capita be for this economy?

Answer 1

Approximately 2%

Step-by-step explanation:

The growth rate (GR) formula is:

GR=((Present value/past value) ^ (1/n))-1

For this problem we will use as present value 200 and for past value 100 because 100*2=200, and n will be 35 years:

GR=[(200/100) ^(1/35)]-1

GR=[ 2^(1/35)]-1

GR= 1.0200 -1

GR= 0.0200

The growth rate of real GDP per capita must be approximately 2%