Question

Some experts estimated that national health spending in the United States grew at 1% in excess of the growth rates of GDP. Assume that this trend would persist for the foreseeable future, and given the fact that the share of GDP on health spending stood at 18% in 2016, what would become the share in 2064, 45 years from now (and 48 years from 2016, the base year), when most of you would enter the traditional retirement age? We should assume that GDP would grow at 3% annually. Do you have a problem with the number you arrive at?

Answer 1

Answer and Explanation:

As in the question it is mentioned that GDP grow at 3% annually and the health spending is also grow at 1% so the growth rate would be 4%

Now the GDP for the year 2064 is

= Share of health spending × (1 + growth rate)^time period

= 0.18 × (1 + 0.04)^48

= 1.18%

As it can be seen that the share of health spending is higher in the year 2024 so it would be warranted and highest share that contains no problem