Question

In: Economics

a. Per capita real GDP in Belgium grew an annual rate of 1.9% in 1994-1995, while...

a. Per capita real GDP in Belgium grew an annual rate of 1.9% in 1994-1995, while per capita real GDP in Malyasia grew an annual rate of 3.8%. Compute the doubling times.
b. Suppose the per capita was $22,000 in Belgium in 1997 and $11,000 in Malaysia in 1997. Assuming rhe same growth rate continue, what will the respective levels of per capita income be in these countries in 2034.
c. How long does it take per capita real GDP in Malyaisa to catch up with real GDP per capita in Belgium?

Please explain step-by-step! Thank you!

Solutions

Expert Solution

a. Doubling time is given by the formula 70 / r

Doubling time for Belgium = 70 / 1.9 = 36.8 years. = ~ 37 years

Doubling time for Malaysia = 70 / 3.8 = 18 years

b. Per capita GDP was $22,000 in Belgium and $11,000 in Malaysia.

Exponential Growth = a ( 1 + r ) x . a is the per capita real GDP. r is the annual growth rate and x is the number of years which is 2034 - 1997 = 37 years

For Belgium: $22,000 ( 1 + 0.019 ) 37 = $22,000 * 2.006526 = $44143.57

For Malaysia:  $11,000 ( 1 + 0.038 ) 37 = $11,000 * 3.974679 = $43721.47

c. It takes 38 years ( 2035 - 1997) for per capita real GDP in Malaysia to catch up with that of Belgium.

Cause in 2034, the GDP is almost close. And if one were to see the figures for 2035 for Belgium where

$44143.57 (1.019 ) = $44982.3

While Malaysia Real GDP per capita is $43721.47 * ( 1.038) = $45382.89

Malaysia's per capita real GDP is more than that of Belgium in 2035.

Rahul Sunny answered 1 year ago
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