This preview shows pages 1–2. Sign up to view the full content.
This preview has intentionally blurred sections. Sign up to view the full version.
View Full Document
Unformatted text preview: ( ) Economic Development ECON0501 # : , Assignment 1 Due September 24 2010 : : Name Go Sujung UID 2008564076 . 1 ( )  , a Using the Harrod Domar model g = / s θ = g the aggregate growth rate = s the rate of saving = θ capital output ratio Here s = 1 / ( %) 5 or 20 and θ = . 4 ∴ g = 1 / , % . 20 or 5 per year ( ) b ①  = The per capita growth rate the aggregate growth rate . ,  the population growth rate Therefore if the required per capita % %, growth rate is 4 and the population growth rate is 3 the % , required aggregate growth rate is 7 per year or 7 / . 100 ②  , Using the Harrod Domar equation the required rate of savings is g × θ , which ( in this case is 7 / ) 100 × , % . 4 or 28 of income ( ) c If θ is the amount of capital Xanadu need to produce a single , unit of output Xanadu will effectively end up using more than that and it must be θ × ( 4 / ). 3 If Xanadu take away a quarter of , this it will get back exactly θ .  Therefore the effective capital output ratio is 4 × ( 4 / ) = 3 16 / .  3 Using this in the Harrod Domar equation with a rate of savings is 1 / , 5 ☞ g = 3 / , 80 which is . % . . 3 75 per year And then subtract the population growth rate ,  . % . Finally the answer for per capita growth is 1 75 per year ( ) d Both current consumption and future consumption bring . Economic welfare A higher savings rate benefits future . consumption at the expense of current consumption So raising , savings rates is not the best way for always therefore should find out some middle point rate of savings which makes an ideal . combination of current and future consumption . 2 ( ) a Effective labor grows at the rate of labor force growth plus , the rate of labor augmenting technical progress ∴ the answer is % . 5 per year ( )...
View
Full
Document
This note was uploaded on 10/18/2010 for the course ECON ECON0211 taught by Professor Tang during the Spring '10 term at Lock Haven.
 Spring '10
 Tang

Click to edit the document details