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Chapter 21: Problem 7

Use the following table to answer the questions. $$ \begin{array}{c|c} \hline \text { Year } & \text { Real GDP (billions of } 2009 \text { dollars) } \\ \hline 1990 & \$ 8,955 \\ \hline 1991 & 8,948 \\ \hline 1992 & 9,267 \\ \hline 1993 & 9,521 \\ \hline 1994 & 9,906 \\ \hline \end{array} $$ a. Calculate the growth rate of real GDP for each year from 1991 to 1994 . b. Calculate the average annual growth rate of real GDP for the period from 1991 to 1994 .

Short Answer

Expert verified
The annual growth rates of real GDP from 1991 to 1994 are -0.078%, 3.57%, 2.74% and 4.04% respectively. The average annual growth rate from 1991-1994 is 2.57%.

Step by step solution

01

Calculate the growth rate for 1991

The growth rate can be found using the formula, so it will be: ((\(8,948\) - \(8,955\)) / \(8,955\)) × 100% = \(-0.078%\)
02

Calculate the growth rate for 1992

Similarly, the growth rate for 1992 will be calculated as: ((\(9,267\) - \(8,948\)) / \(8,948\)) × 100% = \(3.57%\)
03

Calculate the growth rate for 1993

By the same method, the growth rate for 1993: ((\(9,521\) - \(9,267\)) / \(9,267\)) × 100% = \(2.74%\)
04

Calculate the growth rate for 1994

Again, the growth rate for 1994 is computed as: ((\(9,906\) - \(9,521\)) / \(9,521\)) × 100% = \(4.04%\)
05

Calculate the average annual growth rate from 1991 to 1994

The average can now be computed using these rates. It will be the sum of the calculated growth rates divided by the number of years. So it will be: ((-0.078% + 3.57% + 2.74% + 4.04%) / 4) = \(2.57% \)

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