Question

Two​ economies, Hare and​ Tortoise, each start with a real GDP per person of ​$1000 in 1950. Real GDP per person grows4 ​% per year in Hare and 3​% per year in Tortoise. After 70​ years, in year​ 2020, what will be real GDP per person in each​ economy?

Answer 1

2020 GDP per person for Hare

2020GDP = 1950GDP*(1+growthrate)^70

2020GDP = 1,000*(1+0.04)^70

2020GDP = 1,000*(1.04)^70

2020GDP = 1,000*15.5716183502

2020GDP = 15571.6183502

2020GDP = 15571.62

Hence, the 2020 GDP per person for Hare is predicted to be 15571.62

2020 GDP per person for Tortoise

2020GDP = 1950GDP(1+growthrate)^70

2020GDP = 1,000*(1+0.03)^70

2020GDP = 1,000*(1.03)^70

2020GDP = 1,000*7.91782191212

2020GDP = 7917.82191212

2020GDP = 7917.82

Hence, the 2020 GDP per person for Tortoise is predicted to be 7917.82.