1980
$22,784
22.75
1990
$28,598
25.52
2000
$35,265
23.31
Approximate Percentage Growth Rates.
Year
Real Per Capita
GNP
%Growth
1950
$11,745
1960
$13,951
17.21
1970
$18,561
28.55
1980
$22,784
20.50
1990
$28,598
22.73
2000
$35,265
20.96
The approximation is still relatively close, but the approximation errors are larger
because the growth rates are larger. Note that the approximation formula actually
calculates the continuously compounded growth rate.
(d) Growth is fastest in the 1960s. Growth is slowest in the 1950s.
Exercise 2
Wheat and Bread
(a) Product approach: Firm A produces 50,000 bushels of wheat, with no intermediate
goods inputs. At $3/bu., the value of Firm A’s production is equal to $150,000. Firm B
produces 50,000 loaves of bread at $2/loaf, which is valued at $100,000. Firm B pays
$60,000 to firm A for 20,000 bushels of wheat, which is an intermediate input. Firm B’s
value added is therefore $40,000. GDP is therefore equal to $190,000.
(b) Expenditure approach: Consumers buy 50,000 loaves of domestically produced bread
at $2/loaf and 15,000 loaves of imported bread at $1/loaf. Consumption spending is
therefore equal to $100,000
+ $15,000 = $115,000. Firm A adds 5,000 bushels of wheat
to inventory. Wheat is worth $3/bu., so investment is equal to $15,000. Firm A exports
25,000 bushels of wheat for $3/bu. Exports are $75,000. Consumers import 15,000 loaves
of bread at $1/loaf. Imports are $15,000. Net exports are equal to $75,000
−
$15,000 =
$60,000. There is no government spending. GDP is equal to consumption ($115,000) plus
investment ($15,000) plus net exports ($60,000). GDP is therefore equal to $190,000.