ECONOMICS
GDP
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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determine the accompanying rate of inflation
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calculate the size of the GDP gap.
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calculate the number of years required for real GDP to double.
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determine the growth rate of per capita GDP.
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Detailed explanation-1: -For example, if an economy grows at 1% per year, it will take 70 / 1 = 70 years for the size of that economy to double. If an economy grows at 2% per year, it will take 70 / 2 = 35 years for the size of that economy to double.
Detailed explanation-2: -The rule of 70 is used to determine the number of years it takes for a variable to double by dividing the number 70 by the variable’s growth rate. The rule of 70 is generally used to determine how long it would take for an investment to double given the annual rate of return.
Detailed explanation-3: -Using the Rule of 70 If an economy grows at 2 percent per year, it will take 70/2=35 years for the size of that economy to double. If an economy grows at 7 percent per year, it will take 70/7=10 years for the size of that economy to double, and so on.
Detailed explanation-4: -dividing real GDP by population. Given the annual rate of economic growth, the “rule of 70” (also referred to as the rule of 72) allows one to: calculate the number of years required for real GDP to double.
Detailed explanation-5: -There are two ways to calculate the real economic growth rate. Real GDP can be calculated by taking the difference between the most recent year’s real GDP and the prior year’s real GDP. Then, divide this difference by the prior year’s real GDP.