Question

If the economy's real GDP doubles in 9 years, what can we say about the average annual growth rate of real GDP?

1) The average annual growth rate of real GDP is 2%
2) The average annual growth rate of real GDP is 4.5%
3) The average annual growth rate of real GDP is 6%
4) The average annual growth rate of real GDP cannot be determined

Answer 1

The average annual growth rate of real GDP cannot be determined.

Step-by-step explanation:

The average annual growth rate of real GDP can be determined by using the concept of compound growth rates. In this case, the economy's real GDP doubled in 9 years. To find the average annual growth rate, we can use the formula for compound growth:

Growth rate = (Ending value / Beginning value)^(1/Number of years) - 1

Using this formula, the average annual growth rate of real GDP can be calculated as follows:

Growth rate = (2)^(1/9) - 1 = 0.0857 or 8.57%

Therefore, the correct answer is 4) The average annual growth rate of real GDP cannot be determined.