Question

Part 1   (1 point)

Suppose that between 2015 and 2016, nominal GDP grew by 6%. If the price level grew by 2% and population grew by 1.5%, real per capita GDP grew by    %.

Part 2   (1 point)

If real per capita GDP continues to grow at this rate, it would double in     years. Give your answer to the second decimal.

Answer 1

1) 2.5%

( Real GDP growthrate = nominal GDP growth rate - inflation rate

= 6-2=4%

Real percapita GDP growth rate = real GDP growth rate- population growth rate

=4-1.5

=2.5% )

2) 28 years

(We can use rule of 70 to find the doubling time for real per capita GDP growth rate.

Doubling time =70/Real per capita GDP growth rate

=70/2.5

= 28 years )