Consider an imaginary economy that has been growing at a rate of 4% 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. Growth Rate Years Required to Double (Percent) (Nearest whole number of years) 4 5 6

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Business

Juliet King

8 March, 07:52

Consider an imaginary economy that has been growing at a rate of 4% 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. Growth Rate Years Required to Double (Percent) (Nearest whole number of years) 4 5 6

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Nicolas Branch · Answer 1

If the rate is 4%: 70/4 = 17.5 years - about 18 years

Explanation:

The rule of seventy allows you to determine how long the amount invested will double. For this, just divide 70 by the annual rate of return. The rule of seventy can be applied intuitively for the calculation of other growth rates, such as a country's GDP.

The calculation is simple, just divide 70 by the value of the growth rate.

If the rate is 4%: 70/4 = 17.5 years - about 18 years

If the rate is 5%: 70/5 = 14 years

If the rate is 6%: 70/6 = 11.6 years - about 12 years