Consider two countries that each have a Per Capita GDP of $5,000 in 2018. Country A realizes a constant 12% increase in Per Capita GDP each year, while Country B realizes a constant 8% increase in Per Capita GDP each year. Given these constant rates of increase, in 2036 (i. e., 18 years in the future),Per Capita GDP will be approximately. A. $5,600 in Country A and S5,400 in Country B B. $10,800 in Country A and $7,200 in Country B. C.$15,000 in Country A and $10,000 in Country BD. $40.000 in Country A and $20.000 in Country B

The Per Capita GDP for Country “A” and Country “B” would be          40,000$ and 20,000$ respectively.

Explanation:

Stepwise procedure

Initial per capita GDP= 5000$ (Given)

The growth rate for Country A=12% (Given)

The growth rate for Country B=8% (Given)

Time frame=18 years

The point worth understanding here is that Per Capita GDP would happen in compounding manner

Thus,

We know that, for Compound interest

Amount= Principal*(1+rate/100) ^time

Here Amount= Final per capita GDP after 18 years (in 2036)  for both         countries

        Principal= initial per capita GDP

Putting the values in the equation separately for country “A” and Country “B”

We get  

Per capita GDP of “A” after 18 years = 5000*(112/100) ^18

                                      = 38,449.83$ (Approximately 40,000$)

Per capita GDP of “B” after 18 years = 5000*(108/100) ^18

                                       = 19,980$ (Approximately 20,000$)

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