Question

In: Economics

Country A experiences no economic growth, while Country B grows at a sustained rate of 7 percent. In 60 years, what will be Country B's GDP?

If Country A has a GDP of 200 billion and Country B has the same real GDP per capita. Country A experiences no economic growth, while Country B grows at a sustained rate of 7 percent. In 60 years, what will be Country B's GDP?

Expert Solution

By rule of 70:

GDP doubles =70/growth rate

=70/7=10

The GDP doubles in 10 years for country B.

It doubles 6 times in 60 years

GDP after 60 years =GDP * 2^6=200*2^6=12800 million

====

By compound growth fomula

New GDP=old GDP*(1+g)^n

n=60 years

g=7%

old GDP =200 milion

New GDP=200*(1+0.07)^60

=11589.2854

Country B's GDP will be 11589 million

Rahul Sunny answered 2 years ago

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