Macroeconomics
10th Edition
ISBN: 9780134896441
Author: ABEL, Andrew B., BERNANKE, Ben, CROUSHORE, Dean Darrell
Publisher: PEARSON
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Chapter 6, Problem 4NP
To determine
To know: The reason for faster growth rate of countries.
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How large will Canada’s GDP be in 25 years? The answer depends on what the rate of growth in GDP will be over that 25-year period. A mathematical formula we can use for this calculation is the following:
GDP2041 = GDP2016 (1 + g)25
where GDP2041 is the level of GDP in the year 2041, GDP2016 is the level of GDP in the year 2016, and g is the rate of growth in GDP. Assume that GDP in 2016 is $1000 million and assume that the value of g is 0.035 (3.5 percent per year). What will be the value of GDP in 2041? Now suppose that the value of g is 0.040 (4.0 percent per year). What will be the value of GDP in 2041 given this slightly larger rate of growth? What does this result say about the importance of policies that promote even slightly faster rates of growth in GDP?
The following table shows real GDP per capita for Canada, South Korea, and Uganda between 1970 and 2000. All figures are in 1998 U.S. dollars.
The (decade-long) economic growth rate for Canada is shown in the second column. For example, from 1970 to 1980, Canada's GDP grew from $12,717 to $16,731, an increase of $16,731−$12,717$12,717=32%$16,731−$12,717$12,717=32%.
Use this method to fill in the growth rates for South Korea and Uganda.
Canada
South Korea
Uganda
Year
Real GDP per Capita
Growth Rate
Real GDP per Capita
Growth Rate
Real GDP per Capita
Growth Rate
1970
$12,717
$1,886
$190
1980
$16,731
32%
$3,262
$182
1990
$19,540
17%
$6,615
$176
2000
$23,156
19%
$10,807
$247
Source: Organisation for Economic Cooperation and Development (OECD)
1.Compare the data for Canada and South Korea between 1970 and 1980. During this period, (south korea or canda?) had a higher level of real GDP per capita, while ( South Korea or…
India’s GDP per capita increased from $310 in 1991 to $1,489 in 2012.
(i) Calculate the average annual rate of growth of the Indian economy during this period using the arithmetic average.
(ii) Calculate the geometric average annual growth rate of India during this period. Explain why the number you find in (ii) differs from the result obtained in (i).
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