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Suppose a panel of economists is predicting that a nation's real GDP per capita will double in approximately 10 years. Based upon the Rule of 70, what must be the predicted annual growth rate of real GDP per capita?

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Answer:

The answer is: 7% annual growth rate

Explanation:

The Rule of 70 is a way to determine how many years it will take an economy to double its GDP (or GDP per capita) with a given annual growth rate.

The formula used by the Rule of 70 is:

number of years                    =                              70                      

to double an economy                  annual percentage growth rate

In this exercise we substitute the known variables and calculate:

             10 years  =  70 /  (annual growth rate)

             annual growth rate = 70 / 10 = 7%

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