- 1 to calculate average annual
growth rate. Which of the following is wrong with the use of this formula?
10
you don't subtract 1
the division should be 1 billion / 5 billion
the exponent is incorrect
ྋᏟ
ྋᏟ
!
The exponent should be 1/10 and not 10.
1 / 1
ړ
ᳯ᷌
11
If real GDP doubled in 10 years then you know that ___.
the rate of inflation is about 7 percent
the rate of economic growth is about 7 percent
ྋᏟ
ྋᏟ
!
First, changes in real GDP measure economic growth, not inflation.
Second, this is an application of the Rule of 70 as deals with GDP
doubling. Recall the Rule of 70: 70/growth rate = approximate time to
double. If real GDP doubled in 10 years, then the rate of economic growth
would be 7 years as 70/7 = 10.
the rate of inflation is about 10 percent

2019/12/23
下午
12(08
Long Run Growth I: Econ 104
,
Sec. 3
,
Fa19
第
8
页（共
8
页）
the rate of economic growth is about 10 percent
1 / 1
ړ
ᳯ᷌
12
Say 50 years ago the CPI had a value of 70 and today's value is 260. Would
(70/260)
- 1 be the average rate of inflation over these years?
50
yes
no
ྋᏟ
!
It would be (260/70)
- 1 (and note that you'd multiply by 100 to make it
a percent).
(1/50)

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