Question

The Rule of 72 Small differences in annual growth rates cumulate into large differences in GDP. Shown here are the number of years it would take to double GDP at various growth rates. Doubling times can be approximated by the rule of 72. Seventy-two divided by the growth rate equals the number of years it takes to double. Growth Rate Doubling Time (percent) (years) Never 144.0 72.0 48.0 36.0 20.6 20.6 18.0 16.0 14.4 13.1 12.0 11.1 China's output grew at an amazing rate of 8 percent per year from 2010 to 2014 a. At that rate how long would it take for China's GDP to double? years b. With its population increasing at 0.6 percent per year, how long will it take for per capita GDP to double? years

Answer 1

Growth rate = 8%

a.) The time it will take for China's GDP to double is 9 years.

Number of years = 72/Growth Rate

Number of years =72/8

Number of years = 9 years.

b.) With population growing at 0.6 percent a year, the growth rate per capita is the growth rate of GDP subtracted by the growth rate of population. In this case, 8-0.6 = 7.4 percent.

Using the rule of 72(72/7.4), it would take 9.7 years for China's GDP per capita to double.