Questions: Suppose that the country of Kennesania were to realize a constant Real GDP Growth Rate of 4.5% per year. Using the Rule of 72, it follows that Real GDP for Kennesania would double in roughly years. 3.25 7 16 22

Suppose that the country of Kennesania were to realize a constant Real GDP Growth Rate of 4.5% per year. Using the Rule of 72, it follows that Real GDP for Kennesania would double in roughly years.
3.25
7
16
22

Transcript text: Suppose that the country of Kennesania were to realize a constant Real GDP Growth Rate of $4.5 \%$ per year. Using the Rule of 72 , it follows that Real GDP for Kennesania would double in roughly $\qquad$ years. 3.25 7 16 22

Solution

Solution Steps

To determine how many years it will take for Kennesania's Real GDP to double given a constant growth rate of 4.5% per year, we can use the Rule of 72. The Rule of 72 is a simple way to estimate the number of years required to double the value of an investment or GDP at a fixed annual rate of interest. The formula is:

\[ \text{Years to double} = \frac{72}{\text{Growth Rate}} \]

Step 1: Understanding the Rule of 72

The Rule of 72 is a simple formula used to estimate the number of years required to double the value of an investment or GDP at a fixed annual growth rate. The formula is given by:

\[ \text{Years to double} = \frac{72}{\text{Growth Rate}} \]

Step 2: Applying the Rule of 72

Given the growth rate of $4.5\%$ per year, we can substitute this value into the formula:

\[ \text{Years to double} = \frac{72}{4.5} \]

Step 3: Calculating the Result

Perform the division to find the number of years:

\[ \text{Years to double} = \frac{72}{4.5} = 16 \]