The growth rate of real GDP in the United States rises from 4.2% to 4.4%. Explain and calculate how this increase in the growth rate of real GDP affects the number of years it will take for real GDP to double
What will be an ideal response?
The "Rule of 70" states that the number of years it takes for GDP to double is equal to 70 divided by the growth rate of real GDP. Given this formula, at a growth rate of 4.2%, it will take 70/4.2 = 16.67 years for GDP to double. If the growth rate increases by two-tenths of a percent (to 4.4%), the number of years it will take for GDP to double will decrease to 70/4.4 = 15.9 years.
You might also like to view...
Suppose you know a piece of land will be worth $1 million (real) in 2045, and the real interest rate is 5%. About how much should you be willing to pay for the land today (2015)? (Assume no taxes)
a. $610,000 b. $1 million c. $1.89 million d. $230,000
If a country's income level is high:
A. it must have a high level of growth. B. it usually has a high level of GDP per capita. C. it must be well-endowed with natural resources. D. All of these are true.