Small differences In the rate of economic growth can lead to large differences I

Question

Small differences In the rate of economic growth can lead to large differences In living standards. Consider two countries, Upper Richistan and Lower Richistan. Currently, real GOP per person (average Income) Is $41,000 In Upper Richistanand $9,000 In Lower Richistan. Over the past decade, real GOP per person grew at a rate of 1.6% In Upper Richistanand 3.2% In Lower Richistan. Suppose you want to project what the real GOP per person will be In each country 100 years fnom now. You can use a simple formula to do so: In this formula, g represents the growth rate (In decimal form) of real GOP per person and n represents the number of years. If Upper Richistan experiences average Income growth of 1.6% per year for the next 100 years, Its average Income will rise to: Average Income In 100 years = ($41,000) x (1 + 0.016)10 degree Use the growth formula to fill In the table below. (Recall that average Income Is Initially $9,000 In Lower Richistan.) Round your answers to the nearest dollar If average Income continues to gnow at 1.6% per year In Upper Richistan and 3.2% In Lower Richistan, real GOP per person In Upper Richistan will be than real GOP per person In Lower Richistan after 100 years. Suppose the gnowth of average Income falls slightly to 1.0% per year In Upper Richistan and falls slightly to 2.5% per year In Lower Richistan. In this case, real GOP per person In Upper Richistan will be than real GOP per person In Lower Richistan after 100 years.

Explanation / Answer

upper richistan after 100 years
at rate of 1%
41000(1+0.01)100 = 110897

Lower richistan after 100 years

at rate of 3.2%

9000(1+0.032)100 =209996

at rate of 2.5%

9000(1+0.025)100 = 106323

upper richistan lower than Lower Rchistan

upper richistan more than lower richistan

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