If two nations begin with identical real GDP per capita, and one experiences a 2% growth rate while the other grows at 4%, what will happen over time?

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One nation will consistently have a 2% higher real GDP per capita than the other.The country with the 4% growth rate will see its living standards increasingly outpace the slower-growing nation due to the effects of compound growth.The living standards of both countries will gradually become equal.After one year, the nation growing at 4% will have double the GDP per capita of the one growing at 2%.Both countries will maintain the same growth trajectory indefinitely.

Explanation

Because growth compounds over time, the country with the higher 4% growth rate will see its real GDP per capita increase at an accelerating pace compared to the country growing at 2%. This leads to a widening gap in living standards rather than a fixed difference or convergence.