Suppose Mexico's real GDP per person in 2008 is $6,000 and the U.S. real GDP per person is $24,000. Mexico has annual growth in real GDP per person of 5 percent. Approximately how many years will it take Mexico to equal $24,000 of real GDP per person?

Question

Quizplus · Accepted Answer

Using the rule of 70, we can estimate the doubling time for Mexico's GDP per person. The rule of 70 states that the doubling time is approximately 70 divided by the growth rate. For Mexico, this is 70 / 5 = 14 years to double. Starting at $6,000, it will take two doublings to reach $24,000: $6,000 to $12,000 in 14 years, and $12,000 to $24,000 in another 14 years, totaling 28 years.

Suppose Mexico's Real GDP Per Person in 2008 Is $6,000