Suppose an economy's real GDP is $40,000 in year 1 and $42,200 in year 2. What is the growth rate of its real GDP? Instructions: Round your answer to two decimal places. The growth rate of the economy's real GDP = % Assume that population is 100 in year 1 and 102 in year 2. What is the growth rate of real GDP per capita? Instructions: Round your answer to two decimal places. The growth rate of the economy's real GDP per capita = %

The growth rate of the economy's real GDP = 5.50%

The growth rate of the economy's real GDP per capita = 3.43%

Explanation:

The GDP growth rate formula is:

[GDP (t) - GDP (t-1) / GDP (t-1) ]*100

t is years. We use this formula for this problem:

($42,200-$40,000) / $40,000 = 0.055*100 = 5.50%

The growth rate of the economy's real GDP = 5.50%

The formula of the real GDP per capita is:

Real GDP per capita = Real GDP (t) / population (t)

Year 1:

Real GDP per capita = $40,000/100 = $400

Year 2:

Real GDP per capita = $42,200/102 = $413.72

To calculate the growth rate of the real GDP per capita we use the same the same formula before but now with real GDP per capita

($413.72-$400) / $400 = 0.0343 = 3.43%

The growth rate of the economy's real GDP per capita = 3.43%