Question

How long would it take for the price level to double if inflation persisted at (a) 2 percent per year, (b) 5 percent per year, and (c) 10 percent per year?

Answer 1

To find how long it will take the price to double with any inflation rate you will follow the rule of 70. The rule of 70 is how you can estimate the amount of years it will take any variable to double. Following the rule of 70 you will divide 70 by the inflation rate.

A) 2% inflation; 70/2% = 35 years to double

B) 5% inflation; 70/5% = 14 years to double

C) 10% inflation; 70/10% = 7 years to double