Suppose a Country's Potential Level of Real GDP Grows at a Rate

question 3

Multiple Choice

Suppose a country's potential level of real GDP grows at a rate of 6% per year. Use the rule of 72 to calculate how long it takes for the country's potential output to double.

• A) 6 years
• B) 12 years
• C) 24 years
• D) 30 years

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Definitions:

Required Rate

A rephrased definition for the Required Rate of Return; it is the least annual percentage earned by an investment that will entice individuals or companies to put money into a particular security or project.

Expected Growth Rate

The anticipated increase in the value of an investment or index over a specific period of time.

Annual Dividend

The total dividend payment a company offers to its shareholders in a year.

Expected Return

The weighted average of all possible returns for an investment, considering the probabilities of each outcome.