Final answer:
Using the rule of 70, we calculate the approximate number of years it will take for a country's per capita Real GDP to double, given an average annual growth rate. This simple division rule is most accurate for rates under 10% and is a practical tool for understanding economic growth over time.
Step-by-step explanation:
When using the rule of 70, students are typically trying to estimate the number of years it will take for the per capita Real GDP of a country or region to double given a constant average annual growth rate. The rule of 70 and the similar rule of 72 are both used to quickly calculate the doubling time by dividing the number 70 or 72 by the average annual percentage growth rate. For example, if the Real GDP per capita is growing at a 3% annual rate, it would take approximately 70/3 or 23.3 years for that GDP to double according to the rule of 70.
The rules apply more accurately for smaller growth rates, typically under 10%. They provide an easy-to-remember framework for comparing the impact of different growth rates on economic variables over time. These rules illustrate the power of compound interest and compound growth rates to transform economies, as seen with countries that have experienced high growth rates, like the East Asian Tigers.