1 Fantasyland has a current per capita real income of 20000

1. Fantasyland has a current per capita real income of 20,000 units of output, which grows at a current average growth rate of 2.0 percent per annum. What will be the difference in the standard of living twenty years from now if Fantasyland’s real income grows at a rate of 3.5 percent, assuming the population is constant?

Solution

Future value wii be 29,719 units, where current present value and growth rate of 2 percent as an interest rate and time period of twenty years and at the same time

when growth rate is 3.5 percent, the future value will be 39,716 units

This also shows larger impact that are smaller difference in the growth rate and can have longer period of time

the above caluculation will be done using financial calculator