**Live from the RSF Fieldhouse:** I had thought this question was an 80% question--that 80% of Econ 1 students would get it right. Instead, it seems that it is a 60% question.

What makes it so hard for so many?

**(IV) Political Economy/Long-Run Growth/International (20 pts./36 min.):**

Remember the *Rule of 72*: the time it takes a quantity to double is roughly equal to 72 divided by the quantity’s growth rate in percent per year....

(7) (4 pts.: answer this with four numbers in the spaces provided) Real GDP per capita in the United States has been growing at 2%/year for the past 150 years. Annual real GDP per capita in the world today averages $10,000.

(a) If the world economy as a whole grows as fast in real GDP per capita in the future as the U.S. has grown over the past 150 years, how long will it take average real GDP per capita in the world as a whole to double? Answer: Since 72/2 = 36, average world GDP per capita will double in 36 years

(b) If worldwide economic growth continues at such a pace, what will average world GDP per capita be in 2124, roughly? Answer: at that pace, average world GDP per capita will double in 36 years, and then start doubling again. 2124 is 108 years from now. 108/36 = 3. Between now and 2124 there is enough time for three doublings. Three doublings = 8. $10,000 x 8 = $80,000

(c) If worldwide economic growth continues at such a pace, what will average world GDP per capita be in 2232, roughly? Answer: another 108 years, another three doublings. Three doublings = 8. $80,000 x 8 = $640,000

(d) If worldwide economic growth continues at such a pace, what will average world GDP per capita be in 2340, roughly? Answer: another 108 years, another three doublings. Three doublings = 8. $640,000 x 8 = $5,120,000

This was not a question that I expected to divide the class roughly in two...

Comment of the Day:Market failure-free competitive markets in equilibrium do not maximize production. They maximize money-metric surplus:Econ 1: Spring 2016: U.C. Berkeley: Practice Final Exam: I wrote: Suppose that today we have five potential students and five potential teachers for private yoga lessons.

The willingnesses-to-pay for and opportunity costs of teaching one-on-one yoga lessons are as given in the table above.

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J. Bradford DeLong on May 09, 2016 at 12:40 PM in Berkeley, Streams: Comment of the Day, Streams: Economics, Streams: Equitable Growth | Permalink | Comments (6)

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