Calculating Economic Growth and the Rule of 70

Rule 70: estimates the time it will take something to double in value.
The rule of 70 is useful in easily estimating how long it will take for a figure's value to double by using the related percentage growth rate (1). The rule of 70 is used to determine how long it will take for GDP to double but can also be used for other calculations such as figuring out how fast the consumer price index will double by using the inflation rate per year or how quickly the money in your savings account will take to double at its current interest rate. Here is the helpful formula:

Number of years to double = 70 / % growth rate.

Now for an example. Let's suppose that the economic growth rate is 2.8 percent per year and we want to know how many years it will take for GDP to double. All we need to do is divide 70 by 2.8. When we do that, we find that it would take 25 years for GDP to double.

If the economy is not growing, the rule of 70 can be used to calculate how long it would take for GDP to half. For example, if the economic rate is -.04, we divide 70 by .04 in order to determine that GDP will be half its current figure in 1,750 years.



(1) John E. Sayre and Alan J. Morris, Principles of Macroeconomics, 6th ed. (McGraw-Hill Ryerson: Toronto, 2009), 143.

Economic growth; is an increase in an economy's real GDP per capita.

Economic growth rate
Economic growth rate = increase in real GDP per capita/ real GDP per capita pf the previous year*100

2009
2010

Real GDP
1,283,722,000,000
1,324,993,000,000

population
33,720,184
34,108,152

Real GDP per capita 2010 = 1,324,993,000,000/34,108,152= 38846.13
Real GDP per capita 2009= 1,283,722,000,000/33,720,184-38069.84

Economic growth rate=38846.13-38069.34/38069.84*100= 2.04% the economy grew by 2.04%

Dr. Stephanie Powers, "Economic Growth", Intro to Macroeconomics.(Lecture, Donald School of Business, Red Deer Alberta, Winter 2012)