Problem 8. Over the next 100 years, real GDP per capita in Groland is expected to grow at an average annual rate of 2.0%. In Poland, however, growth is expected to be somewhat slower, at an average annual growth rate of 1.5%. If both countries have a real GDP per capita today of $20,000, how will their real GDP per capita differ in 100 years?

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FelisFelis FelisFelis · Answer 1 · 2019-10-23T08:52:03+02:00

Answer:

Their GDP will differ by $56252.01

Step-by-step explanation:

Consider the provided information.

It is given that Groland is expected to grow at an average annual rate of 2.0%.

The GDP per capita today of Groland is $20,000,

In 100 years Groland's real per capita GDP will be:

[tex]20000 \times (1 + 0.02) = 20000 \times (1.02)^{100}= 144892.92[/tex]

Hence, in 100 year Groland's real per capita GDP will be $144892.92

It is given that Poland's is expected to grow at an average annual rate of 1.5%.

The GDP per capita today of Poland is $20,000,

In 100 years Poland's real per capita GDP will be:

[tex]20000 \times (1 + 0.015) = 20000 \times (1.015)^{100}= 88640.91[/tex]

Hence, in 100 year Poland's real per capita GDP will be $88640.91

Now compare how their real GDP per capital differ in 100 years.

$144892.92-$88640.91=$56252.01

Therefore, their GDP will differ by $56252.01