Calculating The Growth Rate Of Income Per Capita Assignment

In 2012 GDP per capita in South Korea (measured in year 2005 dollars) was $$26,675$. In 2020 it was $$31,264$. (a) Calculate the growth rate of income per capita in South Korea over this period. (b) Now suppose that South Korea grows at the same rate for another 20 years 2020 . What will its GDP per capita be in the year $2040?$

**ANS:-**

**a)**The growth rate of income per capita in south korea from 2012 to 2020 can be calculated using the formula: Calculating The Growth Rate Of Income Per Capita Assignment

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Growth rate = (( final value/ initial value) (1/number of years))-1

Where the initial value is the GDP per capita in 2012, the final value is the GDP per capita in 2020, and the number of years is 8.

Substituting the given values, we get:

Growth rate =(($31,264$26,675)18)−1

=1.9% per year.

**b)**

If we assume that south korea will continue to grow at the same rate of 1.9% per year, we can estimate its GDP per capita in 2040 as follows:

GDP per capita in 2040=GDP per capita in 2020 *(1+growth rate)^(number of years)

Where the growth rate is 1.9% per year and the number of years is 20.

Substituting the given values, we get:

GDP per capita in 2040 =$31,264×(1+0.019)20

=$49,035.

Its important to note that this estimate is based on the assumption that south korea will continue to grow at the same rate over the next 20 years.

However, economic growth rates are subject to various factors such as changes in government policies, technological innovations, and global economic conditions, which can affect the growth rate of a country s economy. Calculating The Growth Rate Of Income Per Capita Assignment

- Explanation for step 2

Therefore, this estimate should be taken with caution, and actual outcomes may differ.

**Conclusion:-**

a) Therefore, the growth rate of income per capita in south korea from 2012 to 2020 was 1.9% per year.

b) Therefore, if south korea grows at the same rate as it did from 2012 to 2020, its GDP per capita in 2040 is estimated to be $49,035. Calculating The Growth Rate Of Income Per Capita Assignment