Question

If real GDP in the United States is growing at an annual rate of 3.2% per capita and Bolivia's real GDP per capita is growing at a rate of 1.3%, which of the following would we expect in the long run? Assume real GDP per capita in the United States begins at a level above that of real GDP per capita in Bolivia.

Answer 1

Answer: Both countries' GDP will continue to increase over time.

Explanation: Gross domestic product is the total amount of services rendered and products made by a country within a year. In other words it is the monetary value of the total economic activity of a country annually. GDP per capita shows the GDP per individual, while real GDP takes GDP and adjusts it for inflation. If real GDP increases over time, as inflation increases then that means output in terms of economic activity will also increase. Therefore the differences found in the real GDP per capita in USA and Bolivia will increase as time goes by.