How does a government deficit lead to a current account deficit?
Consider the following data on the population and the real GDP of the economies of the Four
Asian Dragons.
(a) Calculate the real GDP per capita for each
economy.
(b) Calculate the annual growth rates of real
GDP per capita (in percentage) from 2011
to 2014.
(c) Take the natural logarithm of the per capita
real GDP and apply the approximation rule
ln (1 + x) ≈ x to calculate the annual growth
rates (in percentage) from 2011 to 2014. Compare the results to your answer to part (b).
(d) Calculate the accumulative growth rate and
the average growth rate of real GDP per
capita between 1960 and 2014.
(e) Apply the log approximation rule to calculate
the accumulative growth rate and the average
growth rate between 1960 and 2014, and
compare the results to your answer to part
(d). What is the implication of using two different measures to compute the growth rates?