Question

If an economy's GDP will double in 28 years, then its growth rate must be about:

Answer 1

2.5%

Step-by-step explanation:

The Gross Domestic Products (GDP) is the measure of the total market value of all finished goods and services made within a country during a specific period.

Simply stated, GDP is a measure of the total income of all individuals in an economy and the total expenses incurred on the economy's output of goods and services in a particular country.

Given the following data;

Number of years to double = 28

To find the growth rate, we would use the rule of 70.

Rule of 70 can be defined as a metric used to determine the time it will take to double an investment based on its growth rate. Also, it can be used to determine the economic growth by measuring the Gross Domestic Products (GDP).

Mathematically, it is given by the formula;

`Number \; of \; years \; to \; double = \frac {70}{ARR}`

Where;

ARR is the annual rate of return in percent.

Substituting the values into the formula, we have;

`28 = \frac {70}{ARR}`

`ARR = \frac {70}{28}`

ARR = 2.5%

Therefore, the growth rate of the economy's GDP is 2.5%.