Suppose that real GDP per capita of Canada is $32 000 and its growth rate is 2% per year and that real GDP per capita of China is $4 000,and its annual growth rate is 7%.According to the rule of 70,how large will China's real GDP per capita be in 20 years?

Question

Quizplus · Accepted Answer

According to the rule of 70, we can find the number of years it takes for a variable to double by dividing 70 by its annual growth rate.

For Canada: 
70/2 = 35 years to double

After 20 years, Canada's real GDP per capita would be: 
$32 000 x (1 + 0.02)^20 = $44 962.29

For China: 
70/7 = 10 years to double

After 20 years, China's real GDP per capita would be: 
$4 000 x (1 + 0.07)^20 = $16 041.64

Therefore, the best choice is C) $16 000.

Suppose That Real GDP Per Capita of Canada Is $32