The eighth big idea of economics is that compound returns matter. They matter so much, Einstein once called compound interest the eighth wonder of the world!

Take a country that maintains a 10% annual rate of growth. In only 35 years, it will grow to be 32 times wealthier! Compare that to a country with a 2% growth rate—in the same 35 years, its wealth will only double.

This is the magic of compound returns, and it is one of the underappreciated gems of macroeconomics. In this video, Tyler also discusses how it can be applied to personal finance and to life as well.

Stay tuned for more videos in this series, Tyler’s 9 Big Ideas of Economics!

Cowen delivered this talk at the 2018 AP Economics Conference co-hosted by MRU & the St. Louis Fed. If you’re a high school teacher who wants to attend this conference next year, register here: https://bit.ly/2DozLzv

Or join MRU at a future economics teaching event! Visit this page for more information: https://bit.ly/2AQIWq5