Question

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

Answer 1

Answer:

C. Twice

Explanation:

The formula of Rule of 70 states

Number of years to double = 70 ÷ annual percentage growth rate.

For A to double current per capital income it will take 70 ÷ 3.5 = 20 years.

So in 40 years A would be Four times its initial per capital.

For B to double = 70/ 1.75 = 40 years.

So in 40 years B would be two times its initial per capita.

Therefore, in 40 years, A per capita would be twice that of B.