If changes in economic policy could cause the growth rate of real GDP to increase by 1% per year for 100 years, then GDP would be ________% higher after 100 years than it would have been otherwise.

Question

Quizplus · Accepted Answer

Using the Rule of 70, we know that a 1% increase in the growth rate of real GDP would result in real GDP doubling in 70 years. Therefore, over 100 years, real GDP would be approximately 2.7 times higher than it would have been otherwise (1% increase in growth rate per year for 100 years is equal to a 1.01^100 increase in real GDP, which is approximately 2.7). So, the correct answer is C (2.7% higher).

If Changes in Economic Policy Could Cause the Growth Rate