Question

The president of the World Bank is on his way to a meeting with the president of Uruguay. He bumps into you in the hallway and wants to know how long it will take for Uruguay per capita GDP to double. All he knows is that the average growth rate has been about 1 percent. You quickly tell him it will take about ________ years because you know ________.

Answer 1

You quickly tell him it will take about 70 years because you know the Rule of 70.

Step-by-step explanation:

The Rule of 70 is used to determine approximately how many years it will take an investment to double its worth when you are given a certain interest rate, e.g. if the interest rate is 10%, it will take 70/10 = 7 years for an investment to be worth twice as much.

This rule (or the Rule of 72 which is similar) is not exact, but it can give you a pretty accurate amount of time needed for an economy to double its size given a certain growth rate.

the actual number would be:

2 = 1 / 1.01ⁿ

1.01ⁿ = 1 / 2 = 0.5

n = log 0.5 / log 1.01 = 0.30103 / 0.004321 = 69.66 years