Chinese economic growth is the outstanding feature of the world economic scene over the past two decades.

a. In 2018, US output was $20.5 trillion, and Chinese output in 2017 was $13.5 trillion. Suppose that from 2017 the output of China grows at an annual rate of 7. 9%, whereas the output of the United States grows from 2018 at an annual rate of 2. 2%. These are the values in each country for the most recent periods in Tables 1-1 and 1-4, respectively. Using these assumptions and a spreadsheet, calculate and plot US and Chinese output from 2017 or 2018 over the next 100 years. How many years will it take for China to have a total level of output equal to that of the United States?

b. When China catches up with the United States in total output, will residents of China have the same standard of living as US residents? Explain.

c. Another term for standard of living is output per person.

How has China raised its output per person in the last two decades? Are these methods applicable to the United States?

d. Do you think China’s experience in raising its standard of living (output per person) provides a model for developing countries to follow? Explain.

Data from Table 1-1

Data from Table 1-4

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Table 1-1 Growth, Unemployment, and Inflation in the United States, 1990-2018 1990-2007 2008-2009 2010-2017 2018 Percent (average) (average) (average) Output growth rate 3.0 -1.3 2.2 2.9 Unemployment rate 5.4 7.5 6.8 3.7 Inflation rate 2.3 1.3 1.6 2.3 Output growth rate: annual rate of growth of output (GDP). Unemployment rate: average over the year. Inflation rate: annual rate of change of the price level (GDP deflator). Source: IMF, World Economic Outlook, October 2018.