What is the rule of 70 in economics?
Understand the Problem
The question is asking about the Rule of 70, which is a formula used in economics to estimate the number of years required to double the value of an investment at a given annual rate of return. It provides a quick way to understand the relationship between growth rates and the time required for an investment to grow.
Answer
The rule of 70 estimates doubling time by dividing 70 by the growth rate.
The rule of 70 is a quick way to estimate how many years it will take for a variable to double, given its annual growth rate, by dividing 70 by the growth rate.
Answer for screen readers
The rule of 70 is a quick way to estimate how many years it will take for a variable to double, given its annual growth rate, by dividing 70 by the growth rate.
More Information
The rule of 70 is particularly useful because it provides a simple way to understand the impact of different growth rates on future values, applicable in various contexts such as economics, finance, and demography.
Tips
A common mistake is to confuse the rule of 70 with compound interest formulas. Remember, the rule of 70 is for estimating doubling time, not exact future values.
Sources
- What Is the Rule of 70? Definition, Example, and Calculation - investopedia.com
- Understanding the Rule of 70: A Comprehensive Guide - corporatefinanceinstitute.com
- Growth Rates and the Rule of 70 - Video Tutorials & Practice Problems - pearson.com
