Item 2010 2011 Aggregate hours (billions) 240.6 238.8 Real GDP (billions of 2010

ID: 1211176 • Letter: I

Question

Item

2010

2011

Aggregate hours (billions)

240.6

238.8

Real GDP (billions of 2010 dollars)

9,191

9,215

Based on this table, calculate GDP and growth rates. Be sure to show your calculations.

Calculate the growth rate of real GDP in 2011.

Calculate the labor productivity in 2010 and 2011.

Calculate the growth rate of labor productivity in 2011.

How long will it take for real GDP to double if the 2011 growth rate remains the same over time?

How long will it take for real GDP to double if its growth rate is twice as much as the 2011 growth rate over time?

Item

2010

2011

Aggregate hours (billions)

240.6

238.8

Real GDP (billions of 2010 dollars)

9,191

9,215

(1) Growth rate of real GDP = (9,215 / 9,191) - 1 = 1.0026 - 1 = 0.0026 = 0.26%

(2) Labor productivity = Real GDP / Aggregate hours

2010: 9,191 / 240.6 = $38.2 per hour

2011: 9,215 / 238.8 = $38.59 per hour

(3) Growth rate in productivity = (38.59 / 38.2) - 1 = 1.0102 - 1 = 0.0102, 0r 1.02%

(4) Time to double = 72 / Growth rate [Using Rule of 72] = 72 / 0.0026 = 27,692.31 years

(5) Time to double = 72 / (2 x 0.0026) = 72 / 0.0052 = 13,846.15 years

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