Economics: Other Economics Problems – #29403


Question: Suppose that the country of Xanadu saves 20% of its incoMeand has a capital-output ratio of 4.

(a) (5 points) Using the Harrod-Domar model, calculate the rate of growth of total GDP in Xanadu. What assumption do you need to make to answer this?

(b) (5 points) If population growth were 3% per year and Xanadu wanted to achieve a growth rate per capita of 4% per year, what would its savings rate have to be to get this growth rate?

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