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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 ( )...
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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