In the CIA World Factbook , GDP per capita in the United States in 2010 was appr
ID: 1141734 • Letter: I
Question
In the CIA World Factbook, GDP per capita in the United States in 2010 was approximately $47,400. The formula for growth for any given year, , is =0(1+)^t, where 0 is the value of GDP in the beginning year, is the value of GDP for the specific year in question, is the growth rate, and t is the number of years after 0.
Suppose 0 is GDP per capita in 2010 and the economy continues to grow at approximately 3% as it did in 2010.
What is 1+ under these circumstances?
(1+)=
What is (1+)^t when t is 10 years?
(1+)^t=
What will be the value of GDP per capita in 10 years? Round your answer to the nearest dollar.
GDP per capita, 2020 per person=$
Explanation / Answer
GDP per capita in 2010 = $ 47,400
gy = Growth rate = 3% =0.03
y0 is the GDP per capita in 2010
Under these Circumstances,
(1+gy) = 1+ 0.03 = 1.03
When t is 10 years,
(1+ gy)^t = ( 1+0.03)^10 = 1.03^ 10 = 1.3439
Value of GDP per capita in 10 years i.e value of GDP per capita in 2020 is given by,
y10 = y0 (1+gy)^10 ( t=10 since y0 is the GDP per capita in 2010)
y10 = $47,400(1+0.03)^10
y10 = $ 47,400* 1.3439
= $ 63,700.86
Therefore, GDP per capita in 2020 = $ 63,701