If the National economy shrink at an annual rate of 2% per year for four consecutive years then the economy shrink by 8% over the for year period. How much did the Economy shrink by ? (percentage)

Question

If the National economy shrink at an annual rate of 2% per year for four consecutive years then the economy shrink by 8% over the for year period.

How much did the Economy shrink by ? (percentage)

Answer 1

Y1= (1-2%)Y0

Y2=(1-2%)Y1

Y3= Y2(1-2%)

Y4= Y3(1-2%)

sooooo. Y4= Y0*(1-2%)⁴

Y4/Y1 = (1-2%)⁴ = (.98)⁴ = .92237

So the economy shrank by 1-.9227 or 7.76% over 4 years