Suppose GDP grows from $1000 in 1990 to $1100 in 1995 and $1200 in 2000. Then a.

Question

Suppose GDP grows from $1000 in 1990 to $1100 in 1995 and $1200 in 2000. Then

a.) The average growth rate is 1.8%, and the rate is steady over the decade.
b.) The average growth rate is 1.8%, but it is higher in the first half than in the second half of the decade.
c.) The average growth rate is 20%, and the rate is steady over the decade.
d.) The average growth rate is 2.0%, and the rate is steady over the decade.
e.) The average growth rate is 2.0%, but it is higher in the first half than in the second half of the decade.

Explanation / Answer

Here, The average growth rate is 2.0%, but it is higher in the first half than in the second half of the decade.

Average GDP growth rate = [(Final GDP - Initial GDP)/Initial GDP * 100] /10 = (1200 - 1000)/1000 * 100/10 = 2%.

For the first half of the decade, the average growth rate

= (1100 - 1000)/1000 * 100/5 = 2%

And for second half, the average growth rate

= (1200 - 1100)/1100 * 100/5 = 1.82%

Thus, answer is option (e).

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