?. Answer Problem #3 at the end of chapter 8 in your textbook: Assume that a \"l

Question

?. Answer Problem #3 at the end of chapter 8 in your textbook: Assume that a "leader country" has real GDP per capita of $40,000, whereas a "follower country" has a real GDP per capita of $20,000. Next, suppose that the growth of real GDP per capita falls to zero percent in the leader country and rises to 7 percent in the follower country. If these rates continue fo long periods of time, how many years wi it take for the follower country to catch up to the living standard of the leader country? Show your work!

Explanation / Answer

In this case leader company's GDP per capita is not likely to change, so we need to see by when the GDP per capita of follower country will go up to 40000

Follower country GDP per capita in future should be=40000

20000*(1+7%)^n=40000

1.07^n=2

use natural log on both sides

n=ln(2)/ln(1.07)

n=10.24 years

the above is answer..

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