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30 August, 08:51

wo economies, Hare and Tortoise, each start with a real GDP per person of $1 comma 000 in 1950. Real GDP per person grows 4 % 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?

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  1. 30 August, 08:58
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    Hare 2020 Real GDP per person = $15,572

    Tortoise 2020 Real GDP per person = $3.999

    Explanation:

    To find the answer, we use the future value formula:

    FV = PV (1 + i) ^n

    Where:

    FV = Future Value PV = Present Value i = growth rate n = number of years

    For Hare:

    FV = 1,000 (1 + 0.04) ^70

    = 15,572

    For Tortoise:

    FV = 1,000 (1 + 0.02) ^70

    = 3.999
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