Three Countries Have Different Levels of Gross Domestic Product GDP)

question 30

Essay

Three countries have different levels of gross domestic product GDP) per capita and different growth rates of GDP per capita, as identified in the table. $$\begin{array} { l l c } \hline \text { Country } & \text { GDP per capita } & \begin{array} { c } \text { Growth rate of } \\\text { GDP per capita }\end{array} \\\hline \text { Bohemia } & \$ 44,000 & 2.5 \text { percent } \\\text { Andover } & \$ 32,000 & 5 \text { percent } \\\text { Catalonia } & \$ 30,000 & 1.25 \text { percent } \\\hline\end{array}$$ Suppose the annual growth rates listed in the table remain the same in the upcoming years. Making reference to the rule of 70, would one expect the levels of GDP per capita in these three countries to converge? Why might the three countries have such different growth rates?

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Definitions:

Direct Material Price Variance

The difference between the actual cost of direct materials and the expected (or standard) cost.

Direct Labour Rate Variance

The difference between the actual cost of direct labor and the expected (or standard) cost, based on the standard wages paid for that labor.

Direct Labour Efficiency Variance

A measure used in management accounting to assess the difference between the actual hours worked and the standard hours expected to produce a certain level of output.

Direct Labour Price Variance

The difference between the actual cost of direct labor and the expected (or standard) cost, based on the actual hours worked.