Question

Country A has a real GDP per capita of $1,600. If Country A grows at a constant rate of 3% per year and Country As population remains constant, what is Country A's real GDP per capita by year 20 ? (Aound to the nearest dollar.)

Answer 1

Country A with a real GDP per capita of $1,600, growing at 3% per year, will have a real GDP per capita of approximately $2,898 by year 20 when rounded to the nearest dollar.

Step-by-step explanation:

The question is centered around understanding how real GDP per capita changes over time with a constant rate of economic growth. If Country A has a real GDP per capita of $1,600 and grows at a constant rate of 3% per year with a stable population, we can calculate the future value of the GDP per capita using the formula for exponential growth.

To find the GDP per capita in year 20, we apply the formula for compound growth:
GDP per capita at year 20 = GDP per capita at year 0 × (1 + growth rate)number of years

Here, GDP per capita at year 0 is $1,600, the growth rate is 0.03 (3%), and the number of years is 20. Therefore, the calculation is:
GDP per capita at year 20 = 1600 × (1 + 0.03)20

Using a calculator, GDP per capita at year 20 is approximately $2,898.44. However, since we round to the nearest dollar, the final real GDP per capita for Country A by year 20 is $2,898.