Question 1:- Suppose a country has a gross savings rate of 25%, a depreciation rate of 2%, and an incremental capital output ratio (lCOR) of 2.2. Using the Harrod-Domar growth model, a) find the implied rate of growth of total GDP in the country. b) How much would the rate of savings have to increase to raise the growth rate of total GDP to 10%? c) Is your answer consistent with the Harrod-Domar model? Explain.

Question 1:- Suppose a country has a gross savings rate of 25%, a depreciation rate of 2%, and an incremental capital output ratio (lCOR) of 2.2. Using the Harrod-Domar growth model, a) find the implied rate of growth of total GDP in the country. b) How much would the rate of savings have to increase to raise the growth rate of total GDP to 10%? c) Is your answer consistent with the Harrod-Domar model? Explain.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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