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Problem set 3 Spring 2007

# Problem set 3 Spring 2007 - Name Problem Set#3(due Tuesday...

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Name: ________________________________ Problem Set #3 (due Tuesday, 3/13) Page 1 of 3 1. This question asks you to use the formulas of handout 3a to see the importance of long run economic growth for the Republic of the Gambia. The Republic of the Gambia is a tiny country in West Africa that is less than 48 km high and completely surrounded by Senegal. In 2005, real GDP per person stood at \$1000 for the Gambia. a. Suppose that the Gambia continues to grow at an annual average growth rate of 3 percent. Using the compound interest formula, calculate the level of real GDP per person in 2025 (after 20 years). b. Suppose that the Gambia continues to grow at an annual average growth rate of 3 percent. Using the rule of 72, calculate the number of years to double real GDP per person. c. Suppose instead that the Gambia grows at an annual average growth rate of 5 percent. Using the compound interest formula, calculate the level of real GDP per person in 2025 (after 20 years).

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Problem set 3 Spring 2007 - Name Problem Set#3(due Tuesday...

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