Consider two countries, Upper Richistan and Lower Richistan. Currently, real GDP
ID: 1243694 • Letter: C
Question
Consider two countries, Upper Richistan and Lower Richistan. Currently, real GDP per person (avg. income) is $65,000 in Upper Richistan and $8,000 in Lower Richistan. Over the past decade, the real GDP per person grew at a rate of 1.6% in Upper Richistan and 3.8% in Lower Richistan...
QUESTIONS?
1. 1. What is the Average Income After 100 years in Upper Richistan at a 1.2% growth rate?
a. $156,285
b. $209,977
c. $72,446
d. $214,272
2. 2. What is the Average Income After 100 years in Lower Richistan at a 3.8% growth rate?
a. $140,561
b. $333,292
c. $168,418
d. $200,519
3. 3. What is the Average Income After 100 years in Lower Richistan at a 3.3% growth rate?
a. $95,866
b. $106,323
c. $205,647
d. $107,151
4. 4. If average income continues to grow at 1.6% per year in Upper Richistan and 3.8% in Lower Richistan, real GDP per person in Upper Richistan will be ____?____ than real GDP per person in Lower Richistan after 100 years?
a. Greater
b. Less
5. 5. Suppose the growth of average income falls slightly by 1.2% per year in Upper Richistan and falls slightly to 3.3% per year in Lower Richistan. In this case, real GDP per person in Upper Richistan will be ____?____ than real GDP per person in Lower Richistan after 100 years.
a. Greater
b. Less
THANKS!
Explanation / Answer
Upper Richistan: 1.2% => Average income in 100 Years = (65000)*((1+0.012)^100) = 214271.60 Lower Richistan: 3.8% => Average income in 100 Years = (8000)*((1+0.038)^100) = 333292.34 3.3% => Average income in 100 Years = (8000)*((1+0.033)^100) = 205647