1. Economics 214 Lecture 10 Growth Rates

2. Regional Growth in the U.S.

3. New England Income

4. Growth Formula

5. New England Personal Income Annual Growth Rate = 4% Our bar Chart is approximately a step function. We assume growth doesn’t occur until end of the year.

6. Step Function 19901990 199019911992199319941995 Income Year

7. Income Growth We have depicted the growth of income over time as a step function. It is usually more natural to think of continuous growth, which would be reflected in a smooth evolution over time of variables like income and population.

8. Multiple Compounding in one Period

9. Effect of Number of compounds at 4%

10. Effect of Number of Compounds at 4%

11. Figure 3.2 Compounding at Different Frequencies

12. Continuous Compounding The Exponential

13. Continuous Compounding less 100% growth rate

14. 1 Year continuous compounding

15. Comparison of continuous and discreet compounding

16. Continuous Compounding

17. Effect of Continuous Compounding

18. Annual and Effective Interest Rate

19. Effective Interest Rates