Make sure you understand the power of exponential growth (and of rapid exponential inflation) by doing the following exercises:

(a) How quickly will a country be growing at 10% a year double its income? Quadruple its income? What about a country growing at 5% per year?

(b) Suppose a country’s per capita income is currently growing at 5% per year. Then it shaves an additional percentage point off its population growth rate for the next twenty years, but overall income continues to grow at the same rate. How much richer would the country be at the end of twenty years (per capita)?

(c) Suppose that Brazil experiences inflation at 30% per month. How much is this per year? Do your calculations first without compounding (the answer then is obviously 360%). Now do it properly by compounding the inflation rate.