Chapter 37, Problem 2CYU

To determine

To find:

Time duration for countries to double its real GDP per capita. Whether I’S real GDP per capita would cross that of U.S. if rate of growth remains same.

Explanation of Solution

As we know, the growth rate of C is 8.6%, substituting the value in the formula of rule of 70.

  $\begin{array}{l}\text{Period}\text{=}\frac{\text{70}}{8.6}\\ =8.13\end{array}$

For I, growth rate is 4.5%, time period to double its growth is

  $\begin{array}{l}\text{Period}\text{=}\frac{\text{70}}{0.1}\\ =700\end{array}$

For Ire, growth rate is 4.1%, time period to double its growth is

  $\begin{array}{l}\text{Period}\text{=}\frac{\text{70}}{4.1}\\ =17\end{array}$

For U.S., growth rate is 1.7%, time period to double its growth is

  $\begin{array}{l}\text{Period}\text{=}\frac{\text{70}}{1.7}\\ =41.1\end{array}$

For F, growth rate is 1.2%, time period to double its growth is

  $\begin{array}{l}\text{Period}\text{=}\frac{\text{70}}{1.2}\\ =58.3\end{array}$

For A, growth rate is 0.9%, time period to double its growth is

  $\begin{array}{l}\text{Period}\text{=}\frac{\text{70}}{0.9}\\ =77.7\end{array}$

For Z, growth rate is -0.1%, time period to double its growth is

  $\begin{array}{l}\text{Period}\text{=}\frac{\text{70}}{0.1}\\ =700\end{array}$

The country will be half of it’s existing GDP in 700 years.

Yes, India’s real GDP per capita would exceed that of the United States in the future if growth rates remain the same. India’s rate of growth is higher than that of the United States. This is because, in the United States, the saturation of productivity has come whereas in India, it is still developing nation, so the economy will grow, thereby the economic growth of the nation.

Economics Concept Introduction

The rule of 70 is used to calculate the time duration of which a variable is going to double.

To compute the growth rate of the GDP we use the rule of 70.

Rule of 70 approximately computes how many years it takes for the GDP to double.

  $\text{Period}\text{=}\frac{\text{70}}{\text{Growth}\text{rate}}$