If, between 2010 and 2020, the economy's real GDP grew from $20 billion to $40 billion, what was the average annual growth rate in the economy?

Question

Quizplus · Accepted Answer

To calculate the average annual growth rate, we need to use the Compound Annual Growth Rate (CAGR) formula:

CAGR = (Ending Value / Beginning Value)^(1/Number of Years) - 1

Plugging in the numbers:

CAGR = ($40 billion / $20 billion)^(1/10) - 1 
CAGR = 1.0718 - 1 
CAGR = 0.0718 or 7.18%

Therefore, the average annual growth rate in the economy was 7%.

If, Between 2010 and 2020, the Economy's Real GDP Grew