Question

5. Assume a country whose GDP per capita was $1,000 in 1968 and $100,000 in 2018. What is approximately the average annual growth rate over these 50 years? (Hint: Remember that if a vari- able starts at some initial value yo at time 0 and grows at a constant rate g, then the value of the variable at some future time t is given by y = yo(1+9)') a) 7% b) 8% c) 10% d) 12% 6. If z=r", and 9 = 0.10 What is the growth rate of z? a) 0.10 b) 0.20 c) 0.30 d) 0.40 7. One of the following is NOT a benefit of economic growth: a) Increases in life expectancy b) Reductions in infant mortality c) Expansion in the range of goods and services available d) Income inequality

Answer 1

(5) (c)

If annual growth rate be r, then

1,000 x (1 + r)⁵⁰ = 100,000

(1 + r)⁵⁰ = 100

Taking 50th root,

1 + r = 1.0965

r = 0.0965 = 9.65% ~ 10%

(6) (c)

Taking natural logarithm,

ln z = 3 ln x = 3 x gx where gx = ln x

ln z = 3 x 0.1 = 0.3

(7) (d)

Income inequality is a disbenefit arising from growth.