Use the rules for computing growth rates of ratios, products, and exponentials to calculate the following: (a)

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Question:

Use the rules for computing growth rates of ratios, products, and exponentials to calculate the following:

(a) A country’s real GDP is growing at the rate of 8% a year, while its population is growing at the rate of 2.5% a year. How fast is its real per capita GDP growing?

(b) A country’s real GDP is growing at 4%, but it is also experiencing a high rate of inflation (price level increase) of 10%. How fast is it’s nominal GDP growing?

(c) The government wants to raise the taxes collected by 10%. However, the tax base is only growing by 2.5%. By how much should it raise the average tax rate to meet it’s target tax collection? (Hint: Total taxes collected equals the tax base times the average tax rate)

(d) A country’s nominal GDP is growing at the rate of 16%. Its price level is growing at the rate of 8%, and its population is growing at 2%. How fast is it’s real per capita GDP growing?