Question

The average of growth for slow-growth countries is around 2% per year, and for fast-growth, greater than 5% per year. Suppose the growth rate of the economy is 2%.

a. The size of the economy roughly doubles every :__________
b. If instead the growth rate is 7%, the doubling time for the economy is:_________
c. Economy growth is important to understand because :_______

Answer 1

Answer: a. 36 years

b. 10 years

c. a. It is closely tied to standard of living.

Step-by-step explanation:

a. The Rule of 72 simply states that an amount will double for a certain number of period when using the formula:

= 72 / growth rate

= 72 / 2

= 36 years

b. When the growth rate is 7%, the doubling time for the economy will be:

= 72 / growth rate

= 72 / 7

= 10 years approximately

c. The options are:

Economic growth is important to understand because:

a. It is closely tied to standard of living.

b. Growth guarantees that the rich get richer and the poor get poorer.

c. Income equality cannot exist without growth.

d. Understanding economic growth is key to getting a banking job after graduation