Question

g Suppose that Real GDP is growing at 7.3% per year, and that the population is growing at 2.3% per year. This implies that Real GDP per person will double in approximately ____ years if current trends continue. A. 10 B. 12.5 C. 14 D. 17.5 E. There is too little information.

Answer 1

C. 14.

Explanation:

The Real GDP's increase or decrease and how much it will take for it to double will not be influenced strictly by the economic factors but also by the demographic ones. If the population is increasing, then the percentage of increase of the population should be taken out of the increase of the Real GDP so that we have the right numbers about it. If the population is decreasing, then the number of decrease is added on the rise of the Real GDP so that we have an accurate number.

In this case we have a population rise of 2.3% and a Real GDP rise of 7.3%. If we take out the number of increase of the population from the Real GDP increase we will get 5%, which is actually representing the real increase in the GDP. In order to calculate how much time will be needed for the Real GDP to double we will use the 5% as increase base.

First we take a number by choice that will represent the current Real GDP. Than we calculate how much are 5% of that number and added to it, representing the Real GDP for the next year, and we will continue to do so until we reach double the figure from the starting one or very close to it.

(10,000 / 100) x 5 = 10,500

(10,500 / 100) x 5 = 11,025

(11.025 / 100) x 5 = 11.576.25

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