Question

Richland’s real GDP per person is $10,000, and Poorland’s real GDP per person is $5,000. However, Richland’s real GDP per person is growing at 1 percent per year, and Poorland’s is growing at 3 percent per year. Compare real GDP per person in the two countries after 10 years and after 20 years. Approximately how many years will it take Poorland to catch up to Richland?

Answer 1

Answer:

It will take approximately 36 Years to Poorland to catch up to Richland.

Explanation:

Given data:

The GDP increase in Poorland per year = 1 %

The GDP increase in Richland per year = 3 %

Calculations:

Step 1: For Richland:

The formula for calculating the per year GDP increase for Richland is:

GDP = 10,000 + (10,000 x (1/100)) ---- (1)

GDP for first Year = 10,100$

GDP for second Year = 10,201 $

Similarly using the formula (1) we calculated the values for 10 and 20 years

GDP for 10th Year = 11046.2$

GDP for 20th Year = 12201.9$

Step 2: For Poorland:

The formula for calculating the per year GDP increase for Poorland is:

GDP = 5,000 + (5,000 x (3/100)) ---- (1)

GDP for first Year = 5,150$

GDP for second Year = 5,304.5 $

Similarly using the formula (1) we calculated the values for 10 and 20 years

GDP for 10th Year = 6719.6$

GDP for 20th Year = 9030.6$

Step 3: When will Poorland catch up to Richland:

By calculating values using the above formulas, we have found that for 38th year, Poorland will catch upto Richland and will have more GDP.

Poorland GDP for 36th Year = 14491.4$

Richland GDP for 36th Year = 14307.7$