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24 September, 10:30

In 2012, the imaginary nation of Platland had a population of 10,000 and real GDP of 42,000,000. During the year its real GDP per person grew by about 1.94%. Which of the following sets of growth rates is consistent with this growth in real GDP per person?

A. 3% population growth and 4% real GDP growth

B. 3% population growth and 5% real GDP growth

C. 6% population growth and 4% real GDP growth

D. 6% population growth and 5% real GDP growth

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  1. 24 September, 11:23
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    B. 3% population growth and 5% real GDP growth

    Explanation:

    2012 GDP per person = 42,000,000 : 10,000 = 4,200

    Current population (at 3% growth rate) = 10,000 + (10,000 * 3%) = $10,300

    Current real GDP (at 5% growth rate) = 42,000,000 + (42,000,000 * 5%) = 44,100,000.00

    Current GDP per person = 44,100,000.00 : 10,300 = $4,281.55

    Growth rate of GDP per person = ($4,281.55 - 4,200) / 4,200 = 0.0194, or 1.94%.
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