Are these different growth rates really so important

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Question: The "Rule of 72" permits you to quickly determine how fast an economy can double by dividing 72 by the growth rate. For example, if the growth rate is 1%, an economy will double in size in 72 years; if the growth rate is 7%, it will double in roughly 10 years; and so on. In the table below assume that the economy starts with income of $100. When the growth rate equals 2%, income will double every two generations (consider a generation to be 18 years), as shown in the third column. In 36 years, income grows to $200, and 36 years later it is $400. Compute the doubling in the fourth column when growth rates rise to 4%. Are these different growth rates really so important? Who is most affected?

Reference no: EM131482761

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