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Macroeconomics 5th Edition by Olivier Blanchard
Edition 5ISBN: 978-0132159869Macroeconomics 5th Edition by Olivier Blanchard
Edition 5ISBN: 978-0132159869 Exercise 1
When will Chinese output catch up with U.S. output In 2006, U.S. output was $13.2 trillion, and Chinese output was $2.8 trillion. Suppose that from now on, the output of China grows at an annual rate of 8.8% per year (roughly what it has done during the past decade), while the output of the United States grows at an annual rate of 3.4% per year.
a. Using these assumptions and a spreadsheet, plot U.S. and Chinese output over the next 100 years. How many years will it take for China to have a level of output equal to that of the United States
b. When China catches the United States in total output, will residents of China have the same standard of living as U.S. residents Explain.
a. Using these assumptions and a spreadsheet, plot U.S. and Chinese output over the next 100 years. How many years will it take for China to have a level of output equal to that of the United States
b. When China catches the United States in total output, will residents of China have the same standard of living as U.S. residents Explain.
Explanation
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(a) Using a spreadsheet, we can calculate the output of both economies over the next 100 years relatively quickly. Since this spreadsheet has at least 100 rows, I have only copied a few years before and after the Chinese economy would overtake the United States economy. If the Chinese economy grew at 8.8% per year while the United States economy grew at 3.4% per year, it would take China between 30 and 31 years to overtake the U.S. economy in terms of output. We can understand this variation to use below table: 
(b) When China catches the United States in total output, the residents of China will most likely not have the same standard of living as the United States. Standard of living is most commonly calculated by output per person. Because China has a lot more people than the United States does, output per person would not be equal. When both economies have the same level of output, Chinese residents will have less output per person, meaning their standard of living is not equal to that of the residents of the United States.
(b) When China catches the United States in total output, the residents of China will most likely not have the same standard of living as the United States. Standard of living is most commonly calculated by output per person. Because China has a lot more people than the United States does, output per person would not be equal. When both economies have the same level of output, Chinese residents will have less output per person, meaning their standard of living is not equal to that of the residents of the United States.
Macroeconomics 5th Edition by Olivier Blanchard
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