Question

Consider two scenarios for a nation's economic growth. Scenario A has real GDP growing at an average annual rate of 3.5%; scenario B has an average annual growth of 4.5%. The nation's real GDP would double in about:
1. 20 years under scenario A, versus 30 years under scenario B
2. 20 years under scenario A, versus 16 years under scenario B
3. 12 years under scenario A, versus 16 years under scenario B
4. 16 years under scenario A, versus 30 years under scenario B.

Answer 1

Answer:

2. 20 years under scenario A, versus 16 years under scenario B

Explanation:

It is clearer if I explained with an example:

Let suppose that a nation´s real GDP for 2018 was 1000. In scenario A you will have:

2019:1000*3.5%=1035

2020:1035*3.5%=1071,2

and so on, the same for scenario B

2019: 1000*4,5%= 1045

2020: 1045*4,5%= 1092

and so on.

I attached an excel table where you can see that: in the first scenario, between year 20 and 21 (2038 and 2039) the GDP will double and in the second one, between year 15 and 16 GDP will double. The answer is 2.