Question

According to the CIA, the per capita GDP of the USA in 2017 was $59,500, and that of China was $16,700. Newspapers reported that the rate of growth of GDP per capita in the USA was 3.0% per year and in China, it is 6% per year. Using the rule of 72, calculate approximately how many years it will take for real GDP per capita in China to surpass the GDP per capita in the USA?

Answer 1

Per capita GDP of USA = $59,500

Rate of growth of GDP per capita in USA = 3%

Calculate the number of years in which per capita GDP of USA will double (Using Rule of 72) -

Number of years = 72/Rate of growth of GDP per capita in USA

Number of years = 72/3 = 24 years

So, it will take 24 years for per capita GDP of US to get doubled.

This means in next 24 years, the per capita GDP of US will be ($59,500 * 2) $119,000.

Per capita GDP of China = $16,700

Rate of growth of GDP per capita in China = 6%

Calculate the number of years in which per capita GDP of China will double (Using Rule of 72) -

Number of years = 72/Rate of growth of GDP per capita in China

Number of years = 72/6 = 12 years

So, it will take 12 years for per capita GDP of China to get doubled.

This means in next 12 years, the per capita GDP of China will be ($16,700 * 2) $33,400. In next 12 years, the per capita GDP of China will become ($33,400 * 2) $66,800

So, in 24 years, GDP of China will become $66,800

As Stated above, in 24 years, per capita GDP of US will be $119,000. In next 24 years, the per capita GDP will be $238,000

So, in 48 years, per capita GDP of US will be $238,000.

As stated above, in 24 years, the per capita GDP of China will be $66,800. In next 12 years, it will become $133,600. In next 12 years, it will become $267,000.

So, in 48 years, per capita GDP of US will be $267,000.

Thus,

It will take approximately 48 years for real GDP per capita in China to surpass the GDP per capita in the USA.