Calculate the rate of growth of total income

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Reference no: EM1368560

Suppose Harrod-Damar model with fixed capital-output ratio. Suppose that the country saves 20 percent of its income and has a capital or output ratio of 4.

1) Suppose that there is no population growth and no capital depreciation. Calculate the rate of growth of total income.

2) If population growth were 3% per year and the country wanted to achieve a growth rate per capita of 5% per year, what would its savings rate have to be to get to this growth rate?

3) Suppose depreciation rate rises to 1%. Calculate savings rate which results in 5% per capita growth rate.

4) Discuss how your answers change in 1.1-1.3.

Reference no: EM1368560

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