Final answer:
A 1% increase in world GDP per year over 10 years compounds to a significant increase in the global economy, which would far exceed the annual GDP of smaller countries like Sri Lanka. When considering a $30 trillion global economy, even such a modest yearly increase has profound implications.
Step-by-step explanation:
If trade increases world GDP by 1% per year, the global impact of this increase over 10 years can be significant when compounded. Using the compound interest formula, the growth can be calculated as Future Value = Present Value * (1 + growth rate)^years. If we assume the world's economy is producing more than $30 trillion each year, a 1% increase compounded yearly over 10 years results in a significant addition to the global economy.
When comparing this increase to the annual GDP of a country like Sri Lanka, you would find that even a small percentage of the global economy can dwarf the GDP of smaller economies. For instance, if the global economy grows by 1% per year for 10 years, the cumulative increase would likely be in the trillions of dollars, while the annual GDP of Sri Lanka, a smaller economy, is only a fraction of that amount.
Therefore, while a 1% per year increase in global GDP might seem modest, its cumulative effect is substantial and far exceeds the economic output of smaller countries like Sri Lanka.