Question

In: Economics

Scenario: In 2010, world GDP per capita was $9,500. In the same year, the Economist magazine...

Scenario: In 2010, world GDP per capita was $9,500. In the same year, the Economist magazine forecast that in 2020, world GDP per capita would be $15,000

Refer to the scenario above. If the Economist magazine's forecast is correct, then the growth rate per decade from 2010 to 2020 would be approximately ________.

5 percent.

60 percent

50 percent

6 percent

Scenario: In 2010, world GDP per capita was $9,500. In the same year, the Economist magazine forecast that in 2020, world GDP per capita would be $15,000

Refer to the scenario above. The Economist magazine also forecasts that the rate of growth will remain constant through 2030. If this is correct, then world GDP per capita in 2030 will be closest to ________.

$20,000

$26,000

$24,000

$22,000

Scenario: In a closed economy without a government, the consumption expenditure equals $5,000 and the investment expenditure equals $2,000.

Refer to the scenario above. What is the national income of the economy?

Group of answer choices

$7,000

$10,000

$5,000

$2,000

Solutions

Expert Solution

1. Ans: 5 percent

Explanation:

P(1 + i)n = F

9,500(1 + i)10 = 15,000

(1 + i)10 = 15,000 / 9,500 = 1.5789

1 + i =

1 + i = 1.05

i = 1.05 - 1 = 0.05 or 5%.

2. Ans: $24,000

Explanation:

P(1 + i)n = F

9,500(1 + i)10 = 15,000

(1 + i)10 = 15,000 / 9,500 = 1.5789

1 + i =

1 + i = 1.0467

i = 1.0467 - 1 = 0.0467 or 4.67%

The world GDP per capita in 2030 = P(1 + i)^n

                                                       = 9,500(1 + 0.0467)^20

                                                       = $23,668

It is closest to $24,000.

3. Ans: $7,000

Explanation:

National income = C + I = 5,000 + 2,000 = $7,000


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