Consider the graph of real GDP per capita for Uruguay and Bolivia over the perio
ID: 1208558 • Letter: C
Question
Consider the graph of real GDP per capita for Uruguay and Bolivia over the period 1950-2011.
(a) Based on the figure, do you find evidence that the growth rate in real GDP per capita is different in Uruguay and Bolivia over the period 1950-1975? Explain your answer.
(b) Based on the figure, do you find any evidence that there are permanent differences in savings rates or population growth rates between Uruguay and Bolivia over the entire period (1950-2011)? Explain your answer.
Uruguay 3 Bolivia 1980 2000 YearExplanation / Answer
Real GDP per capita = (Real GDP per year) / (Population per year)
a.
Real GDP per capita is higher in U than B. But the growth rates for 1950-75 are almost similar, since the real GDP per capita gap during these years are almost constant.
b.
Lower real GDP per capita (country B) indicates higher savings or higher population growth, since more savings reduces investment and more population increases the denominator in the above formula. Since U has more real GDP per capita, its savings and/or population growth are lower.