Question

Consider an imaginary economy that has been growing at a rate of 6% per year. government economists have proposed a number of policies to increase the growth rate but first need to convince the president that the policies will pay off. to do so, they want to present a comparison of the number of years it will take for the economy to double, depending on the growth rate. using the rule of 70, determine the number of years it will take the economy to double at each growth rate.

Answer 1

to calculate the rule of 70, you take the average growth rate and divide than into 70.

So 70/(growth rate)

Since you did not provide the expected growth rates, you will need to do the calculation yourself.

Answer 2

Expected growth rates:

1. 6%
2. 7%
3. 8%

Answer:

If we use the rule of 70, then the number of years it will take the country's economy to double are as follows:

1. 6% ⇒ 70 / 6 = 11.67 years to double
2. 7% ⇒ 70 / 7 = 10 years to double
3. 8% ⇒ 70 / 8 = 8.75 years to double

Explanation:

Generally the rule of 70 is more accurate for low growth rates, between 1-5%, and the rule of 72 is more accurate for growth rates between 6-10%. But the difference is really small.