Final answer:
The statement is true; an economy with a 10 percent annual growth rate can expect its GDP to double in approximately 7 years, as calculated by the Rule of 70.
Step-by-step explanation:
The question is whether an economy with an average growth rate of 10 percent can expect to see its real GDP double in approximately 7 years. This can be assessed using the Rule of 70, a quick formula to estimate the number of years required to double the GDP, which involves dividing 70 by the annual growth rate. In this case, 70 divided by 10 gives us 7 years. Therefore, assuming a constant growth rate and compounding, the statement is true.
To understand the impact of growth rates on GDP, consider how different rates affect the economy over time. An economy growing at a 1% annual rate over 50 years will see a 64% increase in GDP, while a 5% growth rate achieves nearly the same increase in just 10 years. Even more impressive, at an 8% growth rate, the GDP will more than double in approximately 8.75 years (using the Rule of 70).