Question

An IAC (industrially advanced country) had a per capita income of $44,000, while a DVC (developing country) had a per ca...


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Transcribed: An IAC (industrially advanced country) had a per capita income of $44,000, while a DVC (developing country) had a per capita income of $2,200 in a given year. If both countries experience a per-capita-income growth of 2 percent, then the per-capita-income gap one year later will be Multiple Choice $636. $41,800. $46,200. $42,636.

Answer

Per capita income is the total income divided by country's population 

Future value = Present value(1+ growth rate)n

n = number of years 

n = 1

Growth rate = 2% = 0.02

IAC per capita income after 1 year= 44000(1+0.02)

= 44880

DVC per capita income after 1 year = 2200(1+0.02)

= 2244

Per capita income gap between two countries = 44880 - 2244

= 42636

Correct : $42636

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