Chapter 37, Problem 3MCQ

To determine

To find:

Time duration to double real GDP if country is growing at 2% per year.

Explanation of Solution

Option C = 35 is correct

To compute the growth rate of the GDP we use the rule of 70.

Rule of 70 approximately computes how many years it takes for the GDP to double.

  $\text{Period}\text{=}\frac{\text{70}}{\text{Growth}\text{rate}}$

We know that growth rate is 2%

  $\text{Period}\text{=}\frac{\text{70}}{\text{2}}$

Period = 35

It will take 35 years for real GDP per capita to double.

A = 3.5 is incorrect

B = 20 is incorrect

D = 70 is incorrect

E = It will never double at that rate is incorrect

Economics Concept Introduction

The rule of 70 is used to calculate the time duration of which a variable is going to double.

To compute the growth rate of the GDP we use the rule of 70.

Rule of 70 approximately computes how many years it takes for the GDP to double.

  $\text{Period}\text{=}\frac{\text{70}}{\text{Growth}\text{rate}}$