Question

Question Set 2: Growth Rates

The data in the table below comes from FRED® Economic Data, a database compiled at the Federal Reserve Bank of St. Louis. The data represents annual nominal GDP for the United States from 2011-2016. The data for nominal GDP is Gross Domestic Product, Billions of Dollars, Annual, Not Seasonally Adjusted. The data for the GDP Implicit Price Deflator is annually (not seasonally) adjusted, with a base year of 2010. The U.S. population data comes from Worldometers.[1] The U.S. annual population growth rate comes from the U.S. Census Bureau.

Year	NGDP (Billions of Dollars)	GDP Deflator (Annual, 2010 = Base)	U.S. Population (Millions)	U.S. Population Annual Growth Rate (In Percentages)
2011	15,517.9	102.1	311.7	.75
2012	16,155.3	103.9	314.1	.75
2013	16,691.5	105.6	316.4	.70
2014	17,393.1	107.5	318.9	.75
2015	18,036.6	108.7	321.4	.73
2016	18,561.1	110.1	324.1	.70

Use the data in the table above to calculate U.S. economic growth rates for the following years:

2016

2014

2012

Question Set 3: Rule of 70

The following table details the growth rate in RGDP per capita for the countries listed from 1975 to 2009.

Country	Growth Rate in RGDP per Capita
Botswana	4.23
Kenya	0.43
Malawi	-0.95
Rwanda	1.09
Uganda	1.25

Taking the information in the table into consideration, answer the following question:

If each country continues to grow at the rate it grew from 1975-2009, how long would it take RGDP per capita to double in each country?

[1] Worldometers United States Population Website

Answer 1

Answer for “Question Set 2: Growth Rates”

The growth rate can be found in different ways. One way is to find using the normal formula, given as:

Growth rate = ((Y_t - Y_t-1 ) / Y_t ).

Where, Y_t is the current value of the variable and Y_t-1  is the past value of the variable.

So, for calculating the growth rates of variables in 2016

Growth rate of NGDP in 2016 = ((NGDP₂₀₁₆- NGDP₂₀₁₅)/NGDP₂₀₁₅)*100

So it is 2.9079 or 2.9

Growth rate of NGDP in 2014 = ((NGDP₂₀₁₄- NGDP₂₀₁₃)/NGDP₂₀₁₃)*100

So it is 4.2033 or 4.2

Growth rate of NGDP in 2012 = ((NGDP₂₀₁₂- NGDP₂₀₁₁)/NGDP₂₀₁₁)*100

So it is 4.1075 or 4.1

We can calculate inflation from the given GDP Deflator data, by using the growth rate formula

For calculating the inflation in 2016, we use

Inflation in 2016 = ((GDP Deflator ₂₀₁₆- GDP Deflator ₂₀₁₅)/GDP Deflator ₂₀₁₅)*100

So, the inflation in 2016 is 1.2879 or 1.29

Inflation in 2014 = ((GDP Deflator ₂₀₁₄- GDP Deflator ₂₀₁₃)/GDP Deflator ₂₀₁₃)*100

So, the inflation in 2014 is 1.7992 or 1.78

Inflation in 2012 = ((GDP Deflator ₂₀₁₂- GDP Deflator ₂₀₁₁)/GDP Deflator ₂₀₁₁)*100

So, the inflation in 2012 is 1.7629 or 1.76

Usually, for inflation we take two digits after the decimal for analysis.

We can find the Real GDP, given nominal GDP and GDP Deflator

The formula for calculating Real GDP is:

((Nominal*Deflator in base year)/Deflator in the current year)

Deflator in the base year would be always 100.

So the Real GDP in 2016 = ((18,561.1*100)/110.1) = $16,858.4bn

The Real GDP in 2014 = ((17,393.1*100)/107.5 = $16,179.6bn

The Real GDP in 2012 = ((16,155.3*100)/103.9) = $15,548.9bn

Answer for “Question Set 3: Rule of 70”

By using Rule of 70, we can calculate how many years it will take to double the growth rate of a variable, given the current growth rate or average growth rate for particular period. The formula for this is: (70/r), where r is the rate of growth.

By using this formula, we can know that,

It will take 16.5 years for Botswana, to double its RGDP per capita

It will take 162.7 years for Kenya to double its RGDP per capita

In case of Malawi, negative growth rate exists. With this negative growth rate, we can find out that, how many years it takes for RGDP per capita to become half of its current size. The answer is that 73.6 years.

It will take 64.2 years for Rwanda to double its RGDP per capita

It will take 56 years to for Uganda to double its RGDP per capita