Question

Suppose real GDP per capita in Canada is $25,000 and its annual growth rate is 5%. During the same time period, the real GDP per capita of Mexico is $2,000 and its annual growth rate is 4%. How much more quickly will Canada double its real GDP than Mexico?

Answer 1

Answer:

Canada will double its GDP 3 years before Mexico.

Explanation:

First, we have to know in how many year Canada and Mexico separately will double their GDP. We use this formula:

Canada:

Year 0: $25,000*1.05= $26,250

Year 1: $26,250 (Year 0 GDP)*1.05=$ 27,562.5

Year 2: $27,562.5 (Year 1 GDP)*1.05=$28,940.6

And so on, the same for Mexico:

Year 0: $2,000*1.04= $2,080

Year 1: $2,080 (Year 0 GDP)*1.04= $2,163.2

Year 2: $2,163.2 (Year 1 GDP)*1,04= $2,249.7

The excel table attached shows that Canada will double its GDP in 15 years (between year 14 and 15) and Mexico will double its GDP in 18 years (between year 17 and 18). Then, it would take 3 years more to Mexico double its GDP.