Answer to Question #171628 in Macroeconomics for olivia Sullivan

Question

Suppose a country’s population grows at the rate of 2% per year and its output grows at the rate of 3% per year.

a) Calculate its rate of growth of per capita output.

b) If instead its population grows at 3% per year and its output grows at 2% per year, calculate its rate of growth of per capita output.

Answer 1

a) Population Growth Rate(p.g.r)$\to 2\%$

Output Growth Rate(o.g.r) $\to 3\%$

Rate of growth of per capita output(o.g.r $-$ p.g.r)

$=(3-2)\%$

$=1\%$

b) Rate of growth of per capita output(o.g.r$-$ p.g.r)

$=(2-3)\%$

=$-1\%$

Meaning the rate of growth of per capita output is negative.