Question

In 2000 , Ethiopia had a per capita income of $635, less than $2 per day. Compute per capita income in Ethiopia for the year 2050 assuming average annual growth rate is a) 1% per year. b) 2% per year c) 4% per year

Answer 1

For 2050, the three scenarios predict:

1% will be $856/year

2% will be $1150/year

4% will be $2060/year

Step-by-step explanation:

The equation that describes the compounded growth of inflation can be defined.

Let I(x) be the per capita income for year x, where x is 0 for 2020, the base year.

Let i be the annual growth rate, in decimal format.

We can now write: I(x) = $635*(1+i)^x

See the attached spreadsheet. The equation above is used to fill the per capita income for the years noted, where x = 0 for 2020 and x = 30 for year 2050.

The three rates. 0.01, 0.02, and 0.04, are in columns marked A, B, and C.

The per capital income for 2050 is noted at the bottom.

For 2050, the three scenarios predict:

1% will be $856/year

2% will be $1150/year

4% will be $2060/year