Suppose a country's potential level of real GDP grows at a rate of 6% per year. Use the rule of 72 to calculate how long it takes for the country's potential output to double.

Question

Quizplus · Accepted Answer

The rule of 72 states that to find the number of years it takes for a variable to double, divide 72 by the annual growth rate of the variable. Therefore, to find the number of years it takes for the country's potential output to double, we divide 72 by the growth rate of 6% per year: 72/6=12. Therefore, it takes 12 years for the country's potential output to double. The correct answer is B.

Suppose a Country's Potential Level of Real GDP Grows at a Rate