(8 points) This table show real GDP per capital for the United States and Korea

Question

(8 points) This table show real GDP per capital for the United States and Korea between 1960 and 1970. All figures are in 1970 U.S. dollars.

Real GDP UNITED STATE (YEAR1960 )= 13414 REAL GDP KOREA YEAR 1960 = 1420

YEAR 1970= 17,802 YEAR 1970 = 2469

a. (4 points) Calculate the growth rate for both the US and Korea between 1960 and 1970.

b. (2 points) Which country grew at a faster rate? Why would this country have grown more quickly?

c. (2 points) Can the country named in (b) maintain the same growth rate overtime? Explain why or why not.

Explanation / Answer

(a) Growth rate, 1960-70 = (Real GDP, 1970 / Real GDP, 1960) - 1

US: (17,802 / 13,414) - 1 = 1.3271 - 1 = 0.3271 = 32.71%

Korea: (2,469 / 1,420) - 1 = 1.7387 - 1 = 0.7387 = 73.87%

(b) Korea has grown at a faster rate. The reason is, the real GDP of Korea in 1960 was much less smaller than that of US, so percentage increase is higher.

(c) Korea cannot maintain the same growth rate. As real GDP keeps rising at such a high rate, inflation will start increasing, which will eventually slow down the economic growth as purchasing power of consumers falls.

Related Questions

Navigate

• Browse (All)
• Browse #
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.