Country a and Country B Initially Have the Same Real

question 64

Multiple Choice

Country A and Country B initially have the same real GDP per capita.Country A experiences no economic growth, while Country B grows at a sustained rate of 5 percent.In 14 years, Country A's GDP will be approximately ____ that of Country B.

• A)one-fourth
• B)one-half
• C)double
• D)triple
• E)five times

---

Definitions:

Income Effect

The change in an individual’s or economy’s income and how that change will affect the quantity demanded of a good or service.

Substitution Effect

The change in consumption patterns due to a change in the relative prices of goods, leading consumers to replace more expensive items with less expensive ones.

Interest-Rate Increase

A rise in the cost of borrowing money, reflected in a higher percentage charged on loans and credits.

Consumer Optimum

A state where a consumer has allocated their resources in such a way that maximizes their utility, given their budget constraint.