Answer to Question #126982 in Macroeconomics for martin tsekpoe

Question

1. Consider Country (Z) with a GDP level of 210,000 and a growth rate of 5% in 2019 (i.e. calculated at the end of year 2019). The experts predict that the growth of the economy of Country (Z) wills gradually slowdown in the coming years. More precisely, they foresee the following growth rates for the future: 2019 – 2022 (5%), 2022 – 2025 (3%).

Requirement
a) Assuming that the predictions of the experts listed above are accurate, when in the future will Country Z’s GDP double compared to the GDP level of 2019? [10 marks]
b) What would Country Z’s GDP growth rate be from 2025 and so on at 1%? Explain your reasoning carefully. [5 marks]
c) Consider now the more optimistic scenario in which the economy does not slow down and the current growth rate of 5% remains constant in the coming years. How long will it take for the GDP level to double in this scenario? Express your answer in two forms:
i) In number of years
ii) As a fraction of your answer in part a

Answer 1

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