Question

Problem 8. Over the next 100 years, real GDP per capita in Groland is expected to grow at an average annual rate of 2.0%. In Poland, however, growth is expected to be somewhat slower, at an average annual growth rate of 1.5%. If both countries have a real GDP per capita today of $20,000, how will their real GDP per capita differ in 100 years?

Answer 1

Their GDP will differ by $56252.01

Explanation:

Consider the provided information.

It is given that Groland is expected to grow at an average annual rate of 2.0%.

The GDP per capita today of Groland is $20,000,

In 100 years Groland's real per capita GDP will be:

`20000 * (1 + 0.02) = 20000 * (1.02)^(100)= 144892.92`

Hence, in 100 year Groland's real per capita GDP will be $144892.92

It is given that Poland's is expected to grow at an average annual rate of 1.5%.

The GDP per capita today of Poland is $20,000,

In 100 years Poland's real per capita GDP will be:

`20000 * (1 + 0.015) = 20000 * (1.015)^(100)= 88640.91`

Hence, in 100 year Poland's real per capita GDP will be $88640.91

Now compare how their real GDP per capital differ in 100 years.

$144892.92-$88640.91=$56252.01

Therefore, their GDP will differ by $56252.01