The economy is in a recession and the government wants to increase output. If the multiplier equals 3 and the government increas
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Answer:
40 years
Explanation:
Given:
Per capita GDP of United states = $32,000
Per capita GDP of China = $4,000
Growth rate of United states = 2%
Growth rate of China = 7%
Now, By the rule of 70
, the GDP will double in years
Therefore,
The United States GDP will double in = = 35 years
Thus,
The GDP of united states in 35 years will be (2 × $32,000 ) = $64,000
this is equals to the 16 times the current GDP of the China
Now,
The China GDP will double in = = 10 years
Therefore,
The GDP of china will be
2 × $4,000 in 10 years = $8,000
in 20 years = 2 × $8,000 = $16,000 ( i.e 4 times)
in 30 years = 2 × $16,000 = $32,000 ( i.e 8 times)
in 40 years = 2 × $32,000 = $64,000 ( i.e 16 times)
Hence, it will take 40 years for China to catch up with the united states