#1: A lower income economy starts off with a per capita GDP of $5,000. How large will the per capita GDP be if it grows at an annual rate of 2% for 10 years? 2% for 30 years? 4% for 10 years? 4% for 30 years? Explain why the difference between 2% and 4% growth matters?
#1: A lower income economy starts off with a per capita
#2: List some arguments for and against the likelihood of “convergence”. What sorts of policies can governments implement to encourage convergence?
#3: What determines how productive workers are? How do gains in labor productivity lead to gains in GDP per capita?
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1.
Final per-capita GDP If the economy grows at
2% for 10 years:
2% for 30 years:
4% for 10 years:
4% for 30 years:
Although it seems that 2% and 4% growth has very small difference, it creates a huge difference as we can see from the calculation over a sufficiently long period of time because of the exponential effect.
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