Question

In year 0, Country A has a real GDP per capita of S1 000 . If Country A grows at a constant rate of 6% per year and Country A's population remains constant, what is Country A's feal GDP per capita by year I0? (Round to the nearest dollar)

Answer 1

To determine Country A's real GDP per capita after 10 years of 6% annual growth, the compound growth formula is applied, resulting in an approximate GDP per capita of $1,791.

Step-by-step explanation:

To calculate Country A's real GDP per capita after 10 years with a constant annual growth rate of 6%, we can use the formula for compound growth:

GDP per capitat = GDP per capita0 × (1 + growth rate)t

Where GDP per capitat is the GDP per capita at year t, GDP per capita0 is the initial GDP per capita, the growth rate is expressed as a decimal, and t is the number of years.

Plugging in the given numbers:

GDP per capita at year 10 = $1,000 × (1 + 0.06)10

Calculating the power of (1 + 0.06) to the 10th year, we get approx:

GDP per capita at year 10 = $1,000 × 1.790847

Therefore, the real GDP per capita of Country A by year 10 is approximately $1,791 (rounded to the nearest dollar).