Suppose average GDP growth rate is 5%. At this rate, how many years will it take to double?

Question

BlackTom AI · Accepted Answer

First, consider the general rule for doubling time in growth scenarios: the Rule of 70. It states that doubling time ≈ 70 divided by the annual growth rate (in percent).

Option 1: '70 years' — If you plug 5% into the Rule of 70, you get 70 / 5 = 14 years, not 70. So this overestimates the time needed to double and is incorrect.

Option 2: '14 years' — This matches the Rule of 70 calculation: 70 ÷ 5 = 14. Therefore, at a 5% growth rate, GDP is expected to double in about 14 years. This aligns with standard macroeconomic intuition about compounding growth.

Option 3: '0.07 years' — This would be roughly 25.5 days, which makes no sense given a 5% growth rate. It likely results from a misapplication of a percent-to-decimal conversion or a misinterpretation of the growth process. It is incorrect.

Option 4: '5 years' — Doubling in 5 years would require a much higher growth rate (solve 5 × growth_rate ≈ 100 by compounding, which implies around 14%+ per year). Therefore, this option misreads the relationship between rate and time and is incorrect.

In summary, the only option that correctly applies the standard doubling-time concept is the one stating 14 years, since doubling time under a 5% growth rate is approximately 70/5 = 14 years. The other choices arise from arithmetic or conceptual mistakes about how growth compounds over time.

ECON 2002.01 AU2025 (21333) Midterm Exam 2- Requires Respondus LockDown Browser

Suppose average GDP growth rate is 5%. At this rate, how many years will it take to double?

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