Present per capita GDP = $1,150
Double its average standard of living in 14 years
What should be the approximate annual economic growth rate required to attain the goal?
Using the Rule of 70
Number of years to double = 70 ÷ Annual growth rate
14 years =70 ÷ Annual Growth rate (%)
14x = 70 (let x is the growth rate)
X = 70 / 14 = 5
Or X = 5%
Approximate annual economic growth rate required will be 5% to attain the goal.
Verification
F = P (F/P, 5%, 14)
F = $1,150 (1.980) = $2,277 (Rounding to nearest value $2,300)
SOLUTION :
It is rule 72 and not rule 70.
As per rule 72, for doubling any growth ,
time required = 72 / growth rate in %
Time required in the given case to double the economic growth is 14 years.
So,
Growth rate required in (%)
= 72 / time required to double the growth
= 72/ 14
= 5.014 %
= 5.01 % approx. (ANSWER).
Check :
GDP in Y14 / Current GDP = (1 + 5.01/100)^ 14 = 1.983 = 2 approx. ( Answer is ok) .
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