Question

Real GDP per person in the United States was $9,864 in 1950. Over the next 48 years, it grew at a compound annual rate of 2.0%. If, instead, real GDP per person had grown at an average compound annual rate 2.5%, then real GDP per capita in the United States in 1998 would have been approximately ______ larger.

Answer 1

real GDP per capita in the United States in 1998 is large by $6751

Step-by-step explanation:

given data

Real GDP per person = $9,864

compound annual rate = 2.0%

average compound annual rate = 2.5%

time = 48 year

solution

real GDP per capita with rate 2% is

real GDP per capita = 9864 ×
`(1+0.02)^(48)` ...............1

and

real GDP per capita when rate = 2.5%

real GDP per capita = 9864 ×
`(1+0.025)^(48)` ...................2

so

Difference between these two equation will be

Difference of real GDP per capita = 9864 ×
`(1+0.025)^(48)` - 9864 ×
`(1+0.02)^(48)`

Difference of real GDP per capita = $6751