Question

Suppose that every $500$ billion of dead capital reduces the average rate of growth in worldwide per capita real GDP by $0.1$ percentage point. If there is $10$ trillion in dead capital in the world, by how many percentage points does the existence of dead capital reduce average worldwide growth of per capita real GDP?

Short answer

$2\%$ of points makes the existence of dead capital reduce average worldwide growth of per capita real GDP.

Step-by-step solution

Introduction.

Annual real GDP per capita growth rate The percentage change in real GDP per capita between two consecutive years is used to compute the annual growth rate of real GDP per capita. GDP at constant prices divided by the population of a country or territory yields real GDP per capita.

Given:

Global average growth rate in real per capita income$=0.1\%$

Find the average rate of growth per capita real.

Each $500$billion dollars of dead capital diminishes the average rate of real GDP per capita by $0.1$percent. Calculation of average real GDP per capita with $10$trillion dollars in dead capital:

$$\begin{gathered} =\left(\frac{10trillion}{0.5trillion}\right)\times 0.1\% \\ =2\% \end{gathered}$$

FYI,

$1000billion=1teillion$

Therefore,

$500billion=0.5trillion$