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What is the rule of 72?

It is worth pausing a moment to marvel at the growth rates of the East Asian Tigers. If per capita GDP grows at, say, 6% per year, then you can apply the formula for compound growth rates—that is (1 + 0.06) 30 —meaning a nation’s level of per capita GDP will rise by a multiple of almost six over 30 years. Another strategy is to apply the rule of 72. The rule of 72 is an approximation to figure out doubling time. The rule number, 72, is divided by the annual growth rate to obtain the approximate number of years it will take for income to double. So if we have a 6% growth rate, it will take 72/6, or 12 years, for incomes to double. Using this rule here suggests that a Tiger that grows at 6% will double its GDP every 12 years. In contrast, a technological leader, chugging along with per capita growth rates of about 2% per year, would double its income in 36 years.

Growth policies for economically-challenged countries

Many economically-challenged or low-income countries are geographically located in Sub-Saharan Africa. Other pockets of low income are found in the former Soviet Bloc, and in parts of Central America and the Caribbean.

There are macroeconomic policies and prescriptions that might alleviate the extreme poverty and low standard of living. However, many of these countries lack the economic and legal stability, along with market-oriented institutions, needed to provide a fertile climate for domestic economic growth and to attract foreign investment. Thus, macroeconomic policies for low income economies are vastly different from those of the high income economies. The World Bank has made it a priority to combat poverty and raise overall income levels through 2030. One of the key obstacles to achieving this is the political instability that seems to be a common feature of low-income countries.

[link] shows the ten lowest income countries as ranked by The World Bank in 2013. These countries share some common traits, the most significant of which is the recent failures of their governments to provide a legal framework for economic growth. Ethiopia and Eritrea recently ended a long-standing war in 2000. Civil and ethnic wars have plagued countries such as Burundi and Liberia. Command economies, corruption, as well as political factionalism and infighting are commonly adopted elements in these low-income countries. The Democratic Republic of the Congo (often referred to as “Congo”) is a resource-wealthy country that has not been able to increase its subsistence standard of living due to the political environment.

The ten lowest income countries

This bar chart that shows ten low-income countries, which include, from lowest income to highest: Burundi, Democratic Republic of the Congo, Eritrea, Niger, Ethiopia, Malawi, Madagascar, Liberia, Guinea, and Central African Republic.
This bar chart that shows ten low-income countries, which include, from lowest income to highest: Democratic Republic of the Congo, Zimbabwe, Burundi, Liberia, Eritrea, Central African Republic, Niger, Madagascar, and Afghanistan. (Source: http://databank.worldbank.org/data/views/reports/map.aspx#)

Low-income countries are at a disadvantage because any incomes received are spent immediately on necessities such as food. People in these countries live on less than $1,035 per year, which is less than $100 per month. Lack of saving means a lack of capital accumulation and a lack of loanable funds for investment in physical and human capital. Recent research by two MIT economists, Abhijit Bannerjee and Esther Duflo , has confirmed that the households in these economies are trapped in low incomes because they cannot muster enough investment to push themselves out of poverty.

Questions & Answers

what is business economics
Nelson Reply
what is business economics
THOMAS Reply
how did Mc connel defined economics
Isaac Reply
what is a economy planning?
Jacob Reply
what is demand
Sunday Reply
demand means desire for a commodity backed by willingness & ability to pay for that commodity
Rajesh
what is supply
Akoheni
supply means suppliers supplying more commodities when price's high or less when price's low to satisfy human want
Prince
the coefficient of price elasticity of supply is the measure of percentage change in the quantity supplied of a good due to a given percentage change in its price.
Khushiba
Please what is Economics of Scales?
Prince
what is cardinal and ordinal utility?
Khushiba
Cardinal utility is the satisfaction derived by the consumers from the consumption of goods and services while ordinal is ranked in terms of preference.
Grace
👍
Khushiba
Please explain what is meant by Economic Integration?
Prince
Please I need help!!!!
Prince
economics scales I don't know but I know laws of returns to scale
Khushiba
hello
TIMAH
hello
Khushiba
can someone help explain to me what is fairly inelastic dd
TIMAH
Economics Economics - The study of how people use their limited resources to try to satisfy unlimited wants
Abdullah
Economic integration has been one of the main economic developments affecting international trade in the last years. Countries have wanted to engage in economic cooperation to use their respective resources more effectively and to provide large markets for member-countries of the resulting integrate
Abdullah
Inelastic Demand When consumers are relatively unresponsive to price changes. A PED coefficient of less than one means that a particular change in the price of a good will be met by a proportionally smaller change in the quantity demanded.
Abdullah
demand refers to goods and services that a consumer is willing and able to buy at given rate over a given period of time
Freeman
Demand  - The entire relationship between the quantity of product that buyers wish to purchase per period time and the price of that product..
Abdullah
what is development planning?
Emmanuel Reply
What is economics?
Shubham Reply
economics is study of scarcity and how humans make decisions.
sade
reason for development planning in West Africa
Emmanuel
what is development planning?
Emmanuel
What is homo Economicus?
nongo Reply
when a person is part 50% rational and the other part of him is 50% focused on money as an incentive
Yahir
what makes the economy to be stable
BELDON Reply
what measures are necessary to the economy which is not doing fine
BELDON
must find out the problems originating from and take remedy for it.
Rigved
Economics as a social science Discuss
Sire
list and explain three implication of balance of payment disequilibrium
Jayson Reply
In economics pollution, what's spillover?
Chinedum Reply
spillover the connection between one part of an economy and another. This can either be financial, where one firm’s actions have a financial effect on another firm, or non-financial where the firm’s actions have an effect on another firm to which no value can be applied, as in the case of pollution
Abdullah
what is net national income
Ibrahim Reply
National income National income - The value of total output and of the income that is generated by the production of that output. (usually in one year).
Abdullah
relation between business economics and traditional economics
Netra Reply
more explanation on GDP
Isaac Reply
it is a country total out put of goods and services divided by the total population of the country.I think it can also be derived from the country labour force,,because it mostly depend on the labour force and the level of technology .
Tantoh
labour force and technological progress leads to greater production increases the GDP
Ahmed
what is elasticity of demand
Jessica
degree of responsiveness of demand to changes in price and other factors that influence demand.
OBIAJULUM
It is the degree of responsiveness of demand and supply to a little change in price of a goods and services
Ibrahim
What is economics?
Bubu Reply
by this time
Emmanuel
It is a social science that analyses production,distribution and consumption of goods and services
Emmanuel
A social science that study human behavior in relationship with decision making
Jessica
a social science that studies human behavior as a relationship between ends and scarce means which has alternative uses
Charllote
it is a science that study human begin as a relation to ends and scarce should which have alternative uses
Ibrahim
the science in which we study about the investement of our wealth.
Atteq
what is competitive demand
joe
a competitive demand is also known as substitute demand .the moment the price of the commodity increase consumers will purchase the other other commodity which it's price is low and the vice versa. an example is milo and bournvita
Yussif
what is different between equilibrium and demand?
Moses
equilibrium is a situation where market is stable there is no entry nor exit. demand is the willingness to pay Which is backed by law.
Yussif
list and explain three implication of balance of payment disequilibrium?
Jayson
Economics is a social science that study's human behaviour as a relationship between ends and scares means which have alternative uses
Patrick

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Source:  OpenStax, Principles of economics. OpenStax CNX. Sep 19, 2014 Download for free at http://legacy.cnx.org/content/col11613/1.11
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