Country A and country B initially have the same per capita income. Suppose that A sustains an annual growth rate of 3.5 percent, while the annual growth rate of country B is 1.75 percent. The "rule of 70" indicates that after forty years, the per capita income of country A will be approximately ____ that of country B.
A) one-half
B) 70 percent greater than
C) twice
D) four times

Question

Quizplus · Accepted Answer

According to the rule of 70, to find out how long it takes for income or GDP to double, we divide 70 by the annual growth rate as a percentage. For country A, it will take approximately 20 years for the per capita income to double (70/3.5=20). After 40 years, it will have doubled twice, or increased by a factor of four. Country B will take approximately 40 years to double (70/1.75=40), so after 40 years, country A will have twice the per capita income of country B.

Country a and Country B Initially Have the Same Per