Question

Let's assume that an average american makes about $63,000 per year and the long-run growth rate is about 3%. how long will it take for an average american to start earning about $126,000?

Answer 1

It will take approximately 23.45 years for an average American to start earning about $126,000 with a long-run growth rate of 3%.

Step-by-step explanation:

To determine how long it will take for an average American to start earning about $126,000, we can use the concept of compound interest. Assuming a long-run growth rate of 3%, we can calculate the time it takes for the average American's earnings to double from $63,000 to $126,000.

To calculate the doubling time, we can use the formula:

Time = (ln(2))/(ln(1+r))

where r is the growth rate. Plugging in the values, we get:

Time = (ln(2))/(ln(1+0.03)) = (ln(2))/(ln(1.03)) ≈ 23.45 years

Therefore, it will take approximately 23.45 years for an average American to start earning about $126,000.