Economic Growth Economic growth, measured as the growth rate of per capita real

Question

Economic Growth Economic growth, measured as the growth rate of per capita real GDP, is the key determinant of living standards in nations across time. The map shows the average annual growth rates of nations across the globe from 1950 to 2010. On the right we give a snapshot of the differences in iving conditions between wealthy nations and poor nations 1%-1.6% growth with 1%gowit, Ming standards 1.7%-2.5% growth wien 2% growth, ming standards almost quadrupled over 58 years Greater than 2.5% growth with 3%growth, some orthepooest Less than 1% growth with 0% growth, nations are no nations are now among the richest 3.25 4.14 4.93 5.54 5.54 better on than they were in 1950.neary doubled over 58 years. Dem. Rep. Congo 1.41 -0.73 -0.47 0.28 0.11 Lebanon Cuba South Africa Bangladesh Nigeria 1.05 1.06 1.17 Canada 1.45 1.53 Chile 1.95 Israel 1.99 Japan 2.07 China 2.28 Taiwan 2.24 South Korea United States Mexico Haiti Liberia Zimbabwe Iraq Pakistan Incomplete Data All dowar rgures are 2010 u.S. dovars. Canada Real Per Capita GDP 950 $11.039 2010 South Korea Real Per Capita GDP 1950·$1,293 2010 $37,761 32,855 Venezuela Real Per Capita GDP 1950 $11,297 2010 $14,950 South Africa Real Per Capita GDP 1950$3,838 010 $7,691

Explanation / Answer

a) Let the number of years required for the GDP to double be n years. Now we are given here that the growth rate per year here is given as 1.95% per annum. Therefore, we have here:

(1 + 0.0195)n = 2

Taking natural log both sides, we get:

n Ln(1.0195 ) = Ln(2)

n = Ln(2) / Ln(1.0195 )

n = 35.89 years

Therefore 35.89 years is the number of years required here.

b) The growth rate for South Korea here is given as: 5.54% per annum.

The GDP here is given as for South Korea in 2010 as $32,855

Now the real GDP per capita that need to increase in South Korea in 2011 to achieve a growth rate consistent with its 60-year average is computed as:

= 0.0554*$32,855

= 1820.167

Therefore $1820 is the required answer here.

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