Suppose that Country A and Country B each had the same per capita real Gross Domestic Product (GDP) of $10,000 in 2013. Country A's per capital real Gross Domestic Product (GDP) had a growth rate of 3 percent per year and Country B's per capital real Gross Domestic Product (GDP) had a growth rate of 4 percent per year. By 2018, the per-capita real Gross Domestic Product (GDP) for the two countries, respectively, were
A) $11,941 and $12,653.
B) $11,593 and $12,167.
C) $10,300 and $10,400.
D) $14,000 and $16,000.

Question

Quizplus · Accepted Answer

Using the formula for exponential growth, we can calculate the per capita real GDP for each country in 2018:

For Country A: 
Per capita real GDP in 2018 = $10,000 * (1 + 0.03)^5 = $11,593.85

For Country B: 
Per capita real GDP in 2018 = $10,000 * (1 + 0.04)^5 = $12,167.09

Therefore, the per capita real GDP for Country A in 2018 is $11,593.85 and for Country B is $12,167.09, which is closest to choice B.

Suppose That Country a and Country B Each Had the Same