Question

Two​ economies, hare and​ tortoise, each start with a real gdp per person of ​$2 comma 000 in 1950. real gdp per person grows 5​% per year in hare and 2​% per year in tortoise. after 70​ years, in year​ 2020, what will be real gdp per person in each​ economy?

Answer 1

Answer:

GDP of hare after 70 year = $60,852.851

GDP of tortoise after 70 year = 7,999.11644

Explanation:

Given:

Starting real GDP = $2,000 (for both hare,tortoise)

Growth rate for hare = 5% = 0.05

Growth rate for tortoise= 2% = 0.02

GDP of hare after 70 year = ?

GDP of tortoise after 70 year = ?

Computation of GDP of hare after 70 year:

GDP of hare after 70 year = $Starting\ real\ GDP(1+g)^n$

GDP of hare after 70 year = $2,000(1+0.05)^{70}$

GDP of hare after 70 year = $2,000(1.05)^{70}$

GDP of hare after 70 year = $60,852.851

Computation of GDP of tortoise after 70 year:

GDP of tortoise after 70 year = $Starting\ real\ GDP(1+g)^n$

GDP of tortoise after 70 year = $2,000(1+0.02)^{70}$

GDP of tortoise after 70 year = $2,000(1.02)^{70}$

GDP of tortoise after 70 year = 7,999.11644