Question

Country Able and Country Baker initially have the same real GDP per capita. Country Able experiences no economic growth, while Country Baker grows at a sustained rate of 7 percent. In 12 years, Country Baker's GDP per capita will be approximately ___________ that of Country Able. Group of answer choices

Answer 1

The Rule of 70 is a useful tool to estimate the number of years it takes for a value to double when it grows at a constant rate. According to this rule, if Country Baker grows at a sustained rate of 7 percent, its GDP per capita will double in approximately 70/7 = 10 years. In 12 years, which is slightly more than 10 years, Country Baker’s GDP per capita will be more than double that of Country Able. So, in 12 years, Country Baker’s GDP per capita will be approximately more than double that of Country Able.