Question

Suppose a panel of economists is predicting that a nation's real GDP per capita will double in approximately 10 years. Based upon the Rule of 70, what must be the predicted annual growth rate of real GDP per capita?

Answer 1

The answer is: 7% annual growth rate

Step-by-step explanation:

The Rule of 70 is a way to determine how many years it will take an economy to double its GDP (or GDP per capita) with a given annual growth rate.

The formula used by the Rule of 70 is:

number of years = 70

to double an economy annual percentage growth rate

In this exercise we substitute the known variables and calculate:

10 years = 70 / (annual growth rate)

annual growth rate = 70 / 10 = 7%