There are two countries on a peninsula. The first has a per capita annual growth rate of 2%, and its neighbor to the south has an annual growth rate of 5%. How much sooner will the country in the south double its GDP per capita than will its neighbor in the north?

Question

Quizplus · Accepted Answer

To determine how much sooner the country in the south will double its GDP per capita compared to its northern neighbor, we use the Rule of 70, which is a way to estimate the number of years required to double an investment at a given annual rate of return. The formula is 70 divided by the annual growth rate. For the northern country with a 2% growth rate, it will take 70 / 2 = 35 years to double its GDP per capita. For the southern country with a 5% growth rate, it will take 70 / 5 = 14 years to double its GDP per capita. The difference between the two is 35 - 14 = 21 years, indicating that the southern country will double its GDP per capita 21 years sooner than the northern country.

There Are Two Countries on a Peninsula