1. Per capita real income grows at a constant rate of 2 percent in country A and
ID: 1204916 • Letter: 1
Question
1. Per capita real income grows at a constant rate of 2 percent in country A and at a constant rate of 4 percent in country B. Both countries initially have the same level of per capita real income. Use Table below to determine how much higher, in percentage terms, per capita real income will be in country B that in country A after 10 years. How much higher will per capita real income be in country B after 50 years?
Number of years
Number of years
Percent 1 2 3 4 5 6 8 1 1.01 1.02 1.03 1.04 1.05 1.06 1.08 2 1.02 1.04 1.06 1.08 1.10 1.12 1.17 3 1.03 1.06 1.09 1.12 1.16 1.19 1.26 4 1.04 1.08 1.13 1.17 1.22 1.26 1.36 5 1.05 1.10 1.16 1.22 1.28 1.34 1.47 6 1.06 1.13 1.19 1.27 1.34 1.41 1.59 7 1.07 1.15 1.23 1.32 1.41 1.50 1.71 8 1.08 1.17 1.27 1.37 1.48 1.59 1.85 9 1.09 1.20 1.30 1.42 1.55 1.68 2.00 10 1.10 1.22 1.34 1.48 1.63 1.79 2.16 20 1.22 1.49 1.81 2.19 2.65 3.20 4.66 30 1.35 1.81 2.43 3.24 4.32 4.74 10.00 40 1.49 2.21 3.26 4.80 7.04 10.30 21.70 50 1.64 2.69 4.38 7.11 11.50 18.40 46.90Explanation / Answer
Percentage change in per capita at the end of 10 years:
Country A: 1.22%
Country B: 1.48
Percentage change in Country B in comparison to Country A:
(1.48 – 1.22) / 1.22 = 0.26 / 1.22 = 21.3%.
Percentage change in per capita at the end of 50 years:
Country A: 2.69%
Country B: 7.11%
Percentage change in per capita in Country B in comparison to Country A
(7.11 – 2.69) / 2.69 = 4.42 / 2.69 = 164.3%
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