Suppose a country is producing $20 million of real GDP. If the economy grows at 10 percent per year, approximately how many years will to take for real GDP to grow to $80 million?

Question

Quizplus · Accepted Answer

This can be calculated using the rule of 70, which estimates the number of years required to double an investment at a given annual rate of return. The formula is 70 divided by the growth rate. In this case, to grow from $20 million to $80 million, the GDP needs to double twice (from $20 million to $40 million, then from $40 million to $80 million). With a 10% growth rate, it takes approximately 7 years to double once. Therefore, to double twice, it would take 7 years for the first doubling and another 7 years for the second doubling, totaling approximately 14 years.

Suppose a Country Is Producing $20 Million of Real GDP