A mathematical approximation called the rule of 70 tells us how long it will take for something to double in size if it grows at a constant rate. The doubling time is approximately equal to the number 70 divided by the percentage rate of growth. Thus, if Panama’s real GDP per person is growing at 7 percent per year, it will take about 10 years (= 70/7) to double. Apply the rule of 70 to solve the following problem: Suppose that real GDP per person in Panama in 2017 was about $12,000 per person, while it was about $48,000 per person in the United States. If real GDP per person in Panama grows at the rate of 5 percent per year, about how long will it take Panama’s real GDP per person to reach the level that the United States was at in 2017? (Hint: How many times would Panama’s 2017 real GDP per person have to double to reach the United States’ 2017 real GDP per person?)

A mathematical approximation called the rule of 70 tells us how long it will take for something to double in size if it grows at a constant rate. The doubling time is approximately equal to the number 70 divided by the percentage rate of growth. Thus, if Panama’s real GDP per person is growing at 7 percent per year, it will take about 10 years (= 70/7) to double. Apply the rule of 70 to solve the following problem: Suppose that real GDP per person in Panama in 2017 was about $12,000 per person, while it was about $48,000 per person in the United States. If real GDP per person in Panama grows at the rate of 5 percent per year, about how long will it take Panama’s real GDP per person to reach the level that the United States was at in 2017? (Hint: How many times would Panama’s 2017 real GDP per person have to double to reach the United States’ 2017 real GDP per person?)

MACROECONOMICS

14th Edition

ISBN:9781337794985

Author:Baumol

Publisher:Baumol

Chapter7: Economic Growth: Theory And Policy

Section: Chapter Questions

Problem 3DQ

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A mathematical approximation called the rule of 70 tells us that the number of years that it will take something that is growing to double in size is approximately equal to the number 70 divided by its percentage rate of growth. Thus, if Mexico's real GDP per person is growing at 7 percent per year, it will take about 10 years ( =70/7) to double. Apply the rule of 70 to solve the following problem. Real GDP per person in Mexico in 2005 was about $ 11,000 per person, while it was about $ 44,000 per person in the United States. If real GDP per person in Mexico grows at the rate of 5 percent per year, about how long will it take Mexico's real GDP per person to reach the level that the United States was at in 2005? (Hint: How many times would Mexico's 2005 real GDP per person have to double to reach the United States' 2005 real GDP per person?)
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