What is the necessary savings rate

Reference no: EM132196935

Question: The Democratic Republic of the Congo's current GDP is close to 35 billion USD. Suppose the gross national savings rate is 10%, the capital-output ratio is 5, and the rate of depreciation is 1%.

a) The DRC's target GDP five years from now is 45 billion USD. What is the growth rate needed to achieve this (calculate the numerical target), if growth occurs according to the Harrod-Domar model?

b) The DRC plans to achieve the targeted growth rate, calculated in part(a) by increasing savings. What is the necessary savings rate? [Assume that the capital-output ratio and depreciation rate does not change]

Reference no: EM132196935

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