EC202 Written Assignment

To save space, the same instructions from previous assignment apply here. Please refer to the previous assignments for submission instruction.

Provide explanation and mathematical work; otherwise, the answer will receive zero points.

(Total 18 points)

Ch.7 and Ch.19

GDP per Capita Growth and Rule of 72

Current Year

Previous Year

Growth Rate

Real GDP

$8.4 trillion

$8.0 trillion

(8.4-8.0)/8.0=

.05*100 = 5%

Population

202 million

200 million

(202 - 200) / 20 = 0.01*100 = 1%

GDP per Capita

$41.584.16

$8.4 trillion/202 million = $41,584.16

$40,000

$8.0 trillion/200 million= $40,000

5%-1%= 4%

Formulas you could use:

Growth Rate in percentage = (Current year value - previous year value)/ previous year

GDP per Capita = Real GDP/population (Ch6 Section 6.4)

Future value = Present value x (1 + growth rate)^number of years (Ch7 Section 7.2)

Rule of 72:

72/growth rate = number of years to double the actual value (Ch19 Section19.2)

The table above is the data for country D, a developed country.

1.(2 points) Calculate the annual growth rate of Real GDP for country D.

2.(2 points) Calculate the annual growth rate of population.

3.(2 points) Calculate GDP per Capita for the current year and previous year.

4.(2 points) What is the annual growth rate of GDP per Capita? How do you find it?

5.(2 points) How do real GDP growth and population growth affect GDP per capita growth?

6.(2 points) Using your calculated figure in (4), calculate the amount of GDP per capita (future value) after 18 years.

7.(2 points) Using the rule of 72, calculate how many years GDP per capita will be double.

8.(2 points) Now we have country E, an emerging country. Country E starts off with a GDP per capita of $4,000, and is experiencing a GDP per capita growth rate of 12%, how many years GDP per capita will be double for country E?

9.(2 points) After 18 years, is there an economic convergence between country D and country E? How many times of GDP per capita country D is larger than country E before and after?