Question

Why is this false:

Answer 1

Answer:

It is false that, if the national economy shrank at an annual rate of 9% per year for three consecutive years then the economy shrank by 27% over the 3-year period, because this percentage does not follow a linear path, but on the contrary, it is calculated exponentially: 9% of each year is calculated on the rest that remained after discounting 9% the previous year.

Thus, if the national economy has a value of 100, after three years it will not have a value of 79, but a value of 75.35, as it arises from the following calculation:

100 x 0.91 ^ 3 = X

100 x 0.753571 = X

75.35 = X