The growth rate of real GDP in the United States rises from 4.2% to 4.4%. Explain and calculate how this increase in the growth rate of real GDP affects the number of years it will take for real GDP to double
What will be an ideal response?
The "Rule of 70" states that the number of years it takes for GDP to double is equal to 70 divided by the growth rate of real GDP. Given this formula, at a growth rate of 4.2%, it will take 70/4.2 = 16.67 years for GDP to double. If the growth rate increases by two-tenths of a percent (to 4.4%), the number of years it will take for GDP to double will decrease to 70/4.4 = 15.9 years.
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