Question

This question is about the rule of 70! In recent decades, the real per capita GDP in the fast growing countries such as China ($2444 in 1985; $13043 in 2017), India ($1032 in 1985, $6422 in 2017), South Korea ($6630 in 1985, $36265 in 2017), Singapore ($18711 in 1985, $67138 in 2017), and Taiwan ($12088 in 1985, $43211 in 2017) has risen about

		around 8 percent per year on average.
		around 2 percent per year on average.
		4 - 6 percent per year on average.
		by more than 10 percent per year on average.

Answer 1

The rule of 70 states that:

The number of years required for doubling real per capita GDP = 70/ Annual Average Percentage growth rate.

The time period under consideration is 1985 to 2017 which is about 32 years.

For China, GDP has grown 5.3367 times ( =13043/2444)

For India, GDP has grown 6.2229 times ( =6422/1032)

For South Korea, GDP has grown 5.4698 times ( = 36265/6630)

For Singapore, GDP has grown 3.5882 times ( = 67138/18711)

For Taiwan, GDP has grown 3.5747 times ( = 43211/12088)

If we take the average for all countries, the average rate of growth is 4.83846 times.

Now let us compare the options according to the rule of 70:

A) around 8% growth rate,

No of years to double = 70/8 = 8.75 years. Hence in 32 years, GDP should be increased by about 12.73 times

B) around 2% growth rate,

No of years to doube = 70/2 = 35 years. Hence in 32 years, GDP will be still not be double the original GDP

C) 4-6 % growth rate,

No of years to double are in between = 70/4 = 17.5 and =70/6 = 11.66 Hence it will take around 14.58333 years to double. Hence for 4% growth rate we can say that 35 years required for four times and for 32 years it will be less than 4 times. This can be said about Singapore and Taiwan(3.5882 and 3.5747 times). For 5-6% growth rate we can say that it requires around 35 years to grow between 4 and 8 times so this fits for China, India and South Korea.

D) >10% growth rate.

This option is ignored as we have already found out the answer.(Option C)