Question

India is growing at a rate of 9% per year, and its real GDP per capita is about $3,500, while the United States is growing at a rate of 3% per year, and its real GDP per capita is about $47,000.

a. About how much will India's real GDP per capita be in 20 years?
i. $19,600
ii. $56,000
iii. $14,000
iv. $28,000

b. How long will it take India to double its GDP per capita?

i. 7.8 years
ii. 10.2 years
iii. 14.6 years
iv. 90 years

c. How long will it take the United States to double its real GDP per capita?

i. 10.5 years
ii. 23.3 years
iii. 30 years
iv. 50 years

d. About how much will the United States' real GDP per capita be in 14 years?

i. $71,000
ii. $28,000
iii. $112,000
iv. $244,000

Answer 1

Answer: a) i. $19,600

b) i. 7.8 years

c) ii. 23.3 years

d) i. $71,000

Explanation:

a. About how much will India's real GDP per capita be in 20 years?

To calculate this we do the following,

India real GDP per capita is about $3,500 growing at 9% so we will future value it,

= 3,500 * (1 + 0.09) ^ 20

= $19,615.44

So rounded off, option i is correct.

b) b. How long will it take India to double its GDP per capita?

Here we use that 70 rule. This rule allows us to divide 70 by the annual growth rate of the GDP and we will find how long it will take to double.

= 70/ 9

= 7.77

= 7.78 years

Option i. 7.8 years is correct.

c. How long will it take the United States to double its real GDP per capita?

Using the same rule

= 70/3

= 23.3 years

Therefore option ii. 23.3 years is correct.

d) About how much will the United States' real GDP per capita be in 14 years?

Using the same concept as in A,

= 47,000 * ( 1 + 0.03) ^ 14

= 71091.7170682

= $71,091.71

= $71,000

Therefore option i. $71,000 is correct.

If you need any clarification, do comment yes?

Cheers.