Suppose real GDP grows at 7 percent per year and the population grows at 2 percent per year. How many years will it take for real GDP and real GDP per person to double?
What will be an ideal response?
Use the Rule of 70 for both answers. The growth rate of real GDP is given in the question, and so the Rule of 70 directly indicates that real GDP doubles in 70 ÷ 7 = 10 years. To determine the number of years it takes for real GDP per person to double, it is necessary to calculate the growth rate of real GDP per person. The growth rate of real GDP per person equals 7 percent minus 2 percent or 5 percent per year. Hence the Rule of 70 shows that real GDP per person doubles in .
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a. True b. False Indicate whether the statement is true or false