Economics deals with all kinds of variables. For many of these variables, both the amount of the variable and the growth rate is calculated to make it easier to assess and predict economic conditions. Rule of 70 is a real way to calculate how long it takes to double the value of a variable. To do this, simply divide the number 70 by the “growth rate of the variable in question.”

Rule of 70 Definition

Suppose, for example, that we want to know how many years it will take for the sausage population (75 million people) to double, which is growing at a rate of 1.3 percent? If we divide 70 by 1/3, the answer would be about 54 years.

The most common uses of this law in the field of economics are the duration of doubling, the number of bank deposits, the amount of GDP of a country, and anything that deals with time and growth rate.

Although this is only an estimate of the future value of an investment, it can be effective in determining how many years a two-year investment takes. Rule of 70 is often used to discuss population growth and can also be used to estimate economic growth, which is usually measured in terms of gross domestic product (GDP).

Rule of 70 Formula:

To calculate the Rule of 70 for investments, first, obtain the annual rate of return or the growth rate of the investment. Next, divide 70 by the annual growth rate or yield.

How can I use Rule of 70 to estimate a country’s GDP growth:

Rule of 70 is a way to estimate the doubling time of a number based on its growth rate. It can also be called the doubling time. The calculation rule of 70 uses the specified rate of return to determine the amount of doubling of a particular amount or investment.

When comparing different investments with different compound annual interest rates, the Rule of 70 is commonly used to determine the rapid growth time of investment. Although this is only an estimate of the future value of an investment, it can be effective in determining how many years a two-year investment takes. Rule of 70 is often used to discuss population growth and can also be used to estimate economic growth, which is usually measured in terms of gross domestic product (GDP).

What does the rule of 70 tell you?

This can also be used to understand economic growth, which is usually measured in terms of gross domestic product (GDP). Gross domestic product is the total monetary or market value of all final goods and services produced within a country’s borders over some time. GDP is considered a comprehensive scorecard for the economic health of a given country.

Because small differences in annual growth rates lead to large differences in the size of economies, the Rule of 70 can act as a constitution to put different growth rates in perspective. This takes almost as long to double the size of the economy. The number of years it takes for a country to double its economic growth is equal to 70 divided by the growth rate, in percent.

For example, if an economy grows at 1% per year, it takes 1.70 = 70 years for the economy to double in size. If an economy grows at 2% per year, it takes 35.2 = 70.2 years for the economy to double in size. If an economy grows at 7% per year, it takes 7/70 = 7 years to double the size of the economy and so on.

Key foods:

Rule of 70 is a way to estimate the doubling time of a number based on its growth rate.

Rule of 70 can be effective in determining how many years a two-year investment takes. It can also be used to estimate economic growth, which is usually measured in terms of gross domestic product (GDP).

Gross domestic product is the total monetary or market value of all final goods and services produced within a country’s borders over some time.

Because small differences in annual growth rates lead to large differences in the size of economies, the Rule of 70 can act as a constitution to put different growth rates in perspective.

Rules of 69 and 72:

Some economists prefer to “Rule of 69” or “Rule of 72”. These are just changes to Rule of 70. Different parameters 69 or 72 reflect different degrees of numerical accuracy and different assumptions about the frequency of the combination.

In particular, 69 is the most accurate parameter for continuous composition and 72 is the most accurate parameter for low repetition composition and medium growth rate. But in general, 70 can be a simpler number to calculate.

For example, suppose you want to compare the number of years that US GDP doubles with the number of years that China’s GDP doubles. Suppose the United States has $ 21.4 trillion in GDP this year and $ 20.5 trillion in GDP last year. The economic growth rate is 4.3% (($ 21.4 trillion – $ 20.5 trillion) / ($ 20.5 trillion).

On the other hand, suppose China has $ 14.3 trillion in GDP this year and $ 13.9 trillion last year. China’s economic growth rate is 2.8% ($ 14.3 trillion – $ 13.9 trillion) / $ 13.9 trillion). Rule of 69 or Rule of 72 is subject to Rule 70.

In short, Rule 69 is used for more precise continuous composition processes, but Rule of 72 may be used for shorter intervals. From the difference between compound interest and Rule of 70, it can be said that compound interest includes all the accumulated interest of previous loan deposit periods. So that the more our combined courses, the higher our combined profit. This profit is considered an important feature in long-term investments and doubling various laws.

Conclusion :

It should be noted that each of the rules for doubling the rate of return may have limitations. Rule of 70 is no exception to this rule and produces erroneous results because it is limited to its ability to predict future growth.

Author

Write A Comment