Economics Responses

ECONOMICS RESPONSES 1
INTRODUCTION TO ECONOMICS
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ECONOMICS RESPONSES 2
Question1
The latest figure for the year-to-year GDP growth rate in Australia is 3.4% as at June quarter
(“https://www.abc.net.au/news/2018-09-05/gdp-june-quarter-2018/10202834”).
Luxembourg Australia
GDP growth rate= 1.7 per cent GDP growth rate = 3.4 per cent
(Obtained from “https://tradingeconomics.com/luxembourg/gdp-growth-annual”)
GDP per capita=$105,800 GDP per capita=$53,800
Since their GDP growth rate was sustained for 20 years, then the quarterly rate when the GDP
for Australia will overtake the one for Luxembourg will be given by the equation;
53800* x* y* 3.4 = 105800* y* 1.7
Where X is the rate and Y is the number of years for the GDP growth which is constant.
Solving that, X = (105800*1.7) / (53800* 3.4) = 0.98
Since g(annually) = (1+g (quarterly))4 -1(Kubiszewski, Costanza, Franco, Lawn 2013,p57)
Then g = 1.984 – 1 = 15.47- 1= 14.47
Therefore, Australia’s GDP will take 15 years to overtake the Luxembourg GDP. During the
fifteenth year, the GDP of Australia will be slightly above that of Luxembourg if their actual
growth rate remains constant as 3.4% for Australia and 1.7% for Luxembourg within the 20
years.