FAQs
The rule of 70 is an easy method of estimating how quickly a variable will double if you know its annual growth rate. If a variable is growing at a rate of x% per period, you simply take 70 and divide it by x. The rule of 70 is useful for all sorts of applications.
What is the 70% rule in economics? ›
The rule of 70 is used to determine the number of years it takes for a variable to double by dividing the number 70 by the variable's growth rate. The rule of 70 is generally used to determine how long it would take for an investment to double given the annual rate of return.
What is the formula for the rule of 70? ›
Hence, the doubling time is simply 70 divided by the constant annual growth rate. For instance, consider a quantity that grows consistently at 5% annually. According to the Rule of 70, it will take 14 years (70/5) for the quantity to double.
Why is 70 used for doubling time? ›
The Rule of 70 helps investors determine the future value of an investment. Although considered a rough estimate, the rule provides the years it takes for an investment to double. The Rule of 70 is an accepted way to manage exponential growth concepts without complex mathematical procedures.
What is the rule of 70 population growth? ›
Explanation of the Rule of 70
The formula is as follows: Take the number 70 and divide it by the growth rate. The result is the number of years required to double. For example, if your population is growing at 2%, divide 70 by 2. The result is 35; it will take 35 years for your population to double at a 2% growth rate.
What is the rule of 70 in economics quizlet? ›
The rule of 70. is a mathematical formula that is used to calculate the number of years it takes real GDP per capita or any other variable to double. If real GDP per capita grows at a rate of 8.3 percent per year, it will take ___ years to double. ( rounded to one decimal place) 8.4 (70/8.3)
What is Rule 72 in economics? ›
Do you know the Rule of 72? It's an easy way to calculate just how long it's going to take for your money to double. Just take the number 72 and divide it by the interest rate you hope to earn. That number gives you the approximate number of years it will take for your investment to double.
What is the rule of 72 and the rule of 70? ›
The rule of 72 is best for annual interest rates. On the other hand, the rule of 70 is better for semi-annual compounding. For example, let's suppose you have an investment that has a 4% interest rate compounded semi-annually or twice a year. According to the rule of 72, you'll get 72 / 4 = 18 years.
What is the rule of 72 exact formula? ›
Using the rule to estimate compounding periods
For instance, if you were to invest $100 with compounding interest at a rate of 9% per annum, the rule of 72 gives 72/9 = 8 years required for the investment to be worth $200; an exact calculation gives ln(2)/ln(1+0.09) = 8.0432 years.
What is the rule of 70 so useful? ›
The rule of 70 states that in order to estimate the number of years for a variable to double, take the number 70 and divide it by the growth rate of the variable. This rule is commonly used with an annual compound interest rate to quickly determine how long it would take to double your money.
If a variable is growing by x% per period, the doubling time would equal approximately: 70 ÷ x periods. In order for a certain variable to double in N years, the growth rate of that variable must be approximately: 70 ÷ N% per year.
How is the rule of 70 used to estimate population doubling? ›
The rule states that if the growth rate of a population is constant, the population will double in size approximately every 70 divided by the growth rate. This rule applies to population growth because it provides a simple way to estimate how long it will take for a population to double based on its growth rate.
What does rule of 70 mean in ecology? ›
The rule of 70 is a rule that can be used to determine how long it will take for a given population to double given its growth rate. The rule of 70 states that if a population has a r% annual growth rate, then the number of years it will take for the population to double can be found by dividing 70 by r.
What is the rule of 72 for population growth? ›
If the population of a nation increases at the rate of 1% per month, it will double in 72 months, or six years.
What is the rule of 70 to calculate the growth rate that leads to a doubling of real GDP per person in 20 years? ›
According to rule 70, the no. of years that a variable can take to become double is determined by taking a ratio of 70 and the annual percentage growth rate of the given variable. In this case, the annual growth rate of real GDP is 70/20 years which is 3.5% per year.
What is the rule of 70 in macroeconomics example? ›
The number of years it takes for a country's economy to double in size is equal to 70 divided by the growth rate, in percent. For example, if an economy grows at 1% per year, it will take 70 / 1 = 70 years for the size of that economy to double.
What is the rule of 70 if a country's real GDP? ›
It will take this country an additional 25 years to double its level of real GDP per capita. If it grows at 7%, then the rule of 70 indicates that this economy will double every 70 / 7 = 10 years. If instead it grows at 2%, then the rule of 70 says that this economy will double every 70 / 2 = 35 years.
What is the Rule of 72 and how is it used in explaining economic growth? ›
The Rule of 72 is a simple way to determine how long an investment will take to double given a fixed annual rate of interest. Dividing 72 by the annual rate of return gives investors a rough estimate of how many years it will take for the initial investment to duplicate itself.
What are the 3 basic rules of economics? ›
As per Adam Smith who is considered as the Father of economics, the 3 laws of economics are: Law of self interest. Law of Competition. Law of Supply and demand.