Which statement best describes the effect of inflation on doubling time using the Rule of 72?

• A. Inflation affects the doubling time; for example, at 6% inflation, it would take about 12 years for prices to double.
• B. Inflation has no impact on the Rule of 72.
• C. The Rule of 72 only applies to taxes.
• D. Double time is always the same regardless of rate.

Answer: (A)

The growth rate you’re using with the Rule of 72 is what determines how long it takes for something to double. If prices rise at a steady inflation rate, the doubling time is roughly 72 divided by that rate (as a percent). So with inflation at 6% per year, prices double in about 72/6 = 12 years. The exact calculation using the exponential model gives t ≈ ln(2)/ln(1.06) ≈ 11.6 years, which is close to 12, illustrating why the rule is a handy shortcut. This shows that inflation does affect doubling time: higher inflation shaves years off the time to double, while lower inflation extends it. The Rule of 72 isn’t limited to taxes and is not a constant regardless of rate; doubling time clearly depends on the rate.