Suppose that the gdp of Oregon today is twice that of 22 years ago. The average annual growth of the gdp is 3.2%
The problem can be solved using growth model:
P = Po (1 + r)ⁿ
Where:
P = quantity after n periods
n = number of periods
r = growth rate
Po = initial quantity
In this problem, the quantity if the gdp.
n = 22 years
P = 2Po
Hence,
2Po = Po (1 + r)²²
(1 + r)²² = 2
1 + r = 2^(1/22) = 1.032
r = 1.032 - 1 = 0.032 = 3.2%
Hence, the average annual growth of the gdp is 3.2%
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