EBK ECONOMICS TODAY
18th Edition
ISBN: 9780133920116
Author: Miller
Publisher: YUZU
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Chapter 18, Problem 2FCT
To determine
In South Korea when the long term rate of total real
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1. According to the Penn World Tables, Real gross domestic product (GDP) per capita
(2005 PPP Dollars), are given for South Korea and Mexico in the years 1975 and 2009 as
below.
South Korea
Mexico
GDP per capita in 1975
4,018.67
7,662.34
GDP per capita in 2009
25,033.62
11,628.87
a. What is the compounded average annual rate of growth for South Korea between
1975 and 2009?
b. What is the compounded average annual rate of growth for Mexico between 1975
and 2009?
c. Notice that in 1975 South Korea was poorer than Mexico, but by 2009 South
Korea was richer than Mexico. Assuming constant growth rates over this period
for both countries, as calculated in parts (a) & (b) above, in what year did South
Korea overtake Mexico?
t
50
ot
.13
Fill in the blank
Italy is a relatively rich country with per-capita GDP of $28,000. India is a relatively poor with per-capita GDP of only $3,500. However, India is growing rapidly at a growth rate of 5% per year. We want to find how many years it will take for India’s per capita GDP to equal Italy’s current per-capita GDP of $28,000.
How many times must India's per-capita GDP double in order to reach Italy's per-capita GDP?
India's per-capita GDP must double ________________________ times.
Use the rule of 70 to find how many years it will take for India's per-capita GDP to double once at a 5% growth rate.
Fill in the third blank.
Italy is a relatively rich country with per-capita GDP of $28,000. India is a relatively poor with per-capita GDP of only $3,500. However, India is growing rapidly at a growth rate of 5% per year. We want to find how many years it will take for India’s per capita GDP to equal Italy’s current per-capita GDP of $28,000.
How many times must India's per-capita GDP double in order to reach Italy's per-capita GDP?
India's per-capita GDP must double __________ times.
Use the rule of 70 to find how many years it will take for India's per-capita GDP to double once at a 5% growth rate.
Doubling time: ______________________ years
How many years will it take for India to reach Italy’s current level of GDP per capita?
It will take ________________ years for India to reach Italy's current level of GDP per capita.
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- Fill in the second blank. Italy is a relatively rich country with per-capita GDP of $28,000. India is a relatively poor with per-capita GDP of only $3,500. However, India is growing rapidly at a growth rate of 5% per year. We want to find how many years it will take for India’s per capita GDP to equal Italy’s current per-capita GDP of $28,000. How many times must India's per-capita GDP double in order to reach Italy's per-capita GDP? India's per-capita GDP must double __________ times. Use the rule of 70 to find how many years it will take for India's per-capita GDP to double once at a 5% growth rate. Doubling time: ______________________ yearsarrow_forwardSuppose that work hours in New Zombie are 200 in year 1 and productivity is $8 per hour worked. What is New Zombie’s real GDP? If work hours increase to 210 in year 2 and productivity rises to $10 per hour, what is New Zombie’s rate of economic growth? Explain why sustained long-term economic growth comes from increases in labor productivity. Why do you think the trend rate of U.S. productivity growth has increased since the earlier 1973–1995 period?arrow_forwardLong-run Economic Growth - End of Chapter Problems 8. Over the next 100 years, real GDP per capita in Groland is expected to grow at an average annual rate of 2.0%. In Sloland, however, growth is expected to be somewhat slower, at an average annual growth rate of 1.5%. If both countries have a real GDP per capita today of $20,000, how will their real GDP per capita differ in 100 years? Round all answers to two places after the decimal point. Groland's real per capita GDP will be $| in 100 years. Sloland's real per capita GDP will be $ in 100 years. In 100 years, Sloland's real per capita GDP will be 61.18 % of Groland's.arrow_forward
- Suppose that work hours in New Zombie are 200 in year 1 and productivity is $8 per hour worked. What is New Zombie’s real GDP? If work hours increase to 210 in year 2 and productivity rises to $10 per hour, what is New Zombie’s rate of economic growth? Explain why sustained long-term economic growth comes from increases in labor productivity. Why do you think the trend rate of U.S. productivity growth has increased since the earlier 1973–1995 period? The quantity of labor and increases in labor productivity are important sources of economic growth. Between 1953 and 2015, in the US economy the labor force increased from 63 million to 158 million workers. Productivity growth has usually been the more significant factor. To calculate real GDP in a given year you have to multiply hours worked by productivity. Suppose that New Zombie has adopted the framework used by the US Bureau of Labor Statistics to calculate its labor force statistics. Following information is extracted from a…arrow_forwardIn 2019 a country has 7.48% growth in real gdp, and uses two factors of production: capital (K) and labor (L). In the table below you see the growth rates of the factors of production. Assume that the share of capital in the production is 40% and the share of labor in production is 60%. Capital (K) Labor (L) A country 4.67% 1.89% How much does growth in capital contribute to GDP growth? Write your answer as a percentage, round at two (2) decimals and do not write the percentage sign.arrow_forward2. a) Why is the difference between 2% and 3% steady yearly real GDP growth in the US economy a huge difference, if its only a difference of 1%? b) Explain why productivity is so essential for growth of the economy. c) What are two government policies that could increase US economic productivity? d) What is the role of Investment in contributing to productivity?arrow_forward
- I am looking for the formula to solve this problem: Suppose a country's real GDP per capita was $9,000 in 1990 and it grew to $18,000 by 2000. What is the annual growth rate of the country's real GDP per capita during this period?arrow_forwardWhat has been the average annual growth rate of U.S. real GDP per person over the 120 years from 1900 to 2020? In which decade, beginning with the 1960s, was the growth of potential GDP per person greatest and slowest? Over the 120 years from 1900 to 2020, the average annual growth rate of U.S. real GDP per person is ____ percentarrow_forward(a) What three institutions do you consider are the most important for a country’s economic growth? Briefly explain. (b) Suppose a “leader country” has a real GDP per capita of $50,000, whereas a “follower country” has a real GDP per capita of $25,000. Next, suppose there is a military takeover in the leader country which causes the growth of real GDP per capita to fall to zero percent. In the meantime, real GDP per capita growth in the follower country rises to 5 percent. If these rates continue for a long period of time, how many years will it take for the follower country to catch up to the living standard of the leader country? (c) If you were to hold the size of the labor force in an economy constant, how would increasing the spending in capital goods help to make workers more productive and increase economic growth? What about the effect on economic growth from increasing the size of the labor force through population growth while physical and human capital remain constant?arrow_forward
- The following figure shows that the average growth rate of real per capita GDP is negatively related to the initial level of real per-capita GDP. Average real per capita growth (5) 4.50 4.00 3.50 3.00 2.50 ||US -2.11 1.50 1.00 0.50 0.00 PHI O Dein HA 02.000 6,000 10,000 14,000 Real income per capita, 1950 Per capita growth 1950-2007 for 22 OECD countries What can we conclude from the above Figure? Because of the diminishing returns to capital accumulation, we should see tendencies for unconditional convergence between poor and rich countries. Divergence between countries is expected if we make conditions on key variables such as population growth rates and savings rates. If countries have similar features such as population growth rates and saving rates, then conditional convergence may occur The OECD countries are homogeneous Richer is the country, faster is its growth ratearrow_forwardBabylonia and Yuan had the same GDP of 20 billion dollars in 1950. Babylonia grew at 7% each year while Yuan grew at 5% each year. Both had the same initial value of physical and human capital and shared the same production function of Y=A*K^0.5*L^0.5 (both K and L have a degree of 0.5 or 1/2). a. After 70 years of the same growth rate of GDP, what was the GDP of each country? Calculate them using Rule of 70. Based on Yuan’s economic size, how many percent larger is Babylonia’s economy than Bahriya’s after 70 years (i.e, in 2020) b. If both countries had the same amount of labour and capital growth throughout the 70 years in Part a, what can explain the difference in GDP in 2020? Pick an example according to the production function and explain your logic. c. Can we call Babylonia a developed nation if their GDP per capita is highest in the world due to its incredible growth in the last 70 years? Briefly explain your answer.arrow_forwardQuestion 3 What has been the average annual growth rate of U.S. real GDP per person over the 120 years from 1900 to 2020? In which decade, beginning with the 1960s, was the growth of potential GDP per person greatest and slowest? Over the 120 years from 1900 to 2020, the average annual growth rate of U.S. real GDP per person is 1.5 percent. That's incorrect. Over the 120 years from 1900 to 2020, the average annual growth rate of real GDP per person in the United States wasn't 1.5 percent.arrow_forward
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