If the annual inflation rate is 5 percent a year, about how many years will it take for the price level to double?
A)10 years
B)12 years
C)14 years
D)16 years

Question

Quizplus · Accepted Answer

The rule of 72 estimates the time it takes for a given variable (such as prices) to double at a given rate of growth (such as the inflation rate). To use the rule of 72, divide 72 by the rate of growth. In this case, 72 divided by 5 equals 14.4, which rounded to the nearest whole number, is 14. Therefore, it would take approximately 14 years for the price level to double with an annual inflation rate of 5 percent. The closest answer choice is C) 14 years.

If the Annual Inflation Rate Is 5 Percent a Year