EcoDevAssignment 1 - rate is 10 Use the Harrod-Domar...

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Eco330 Summer 2010 Assignment 1 1. Explain how low levels of living can turn into a vicious cycle in  developing countries. 2. Explain why purchasing power parity measures of income levels  tend to show a smaller difference between poor and rich  countries. What are the three main indicators that make up the Human  Development Index? 3. Describe Rostow’s stages of growth model and Solow neoclassical  growth model.  Discuss their pros and cons. 4. Assume a closed economy, perfectly elastic labor supply, and  linear technology. Suppose the incremental capital-output ratio  (ICOR) is 3, the depreciation rate is 3%, and the gross savings 
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Unformatted text preview: rate is 10%. Use the Harrod-Domar( Rostow’s) growth equation to determine the rate of growth. What would the gross savings rate have to be to achieve 5% growth? 5. During the past decade, India has invested about 22% of its GDP while China’s investment rate has been double that of India’s. India’s annual growth rate has been about 6% while that of China has been about 9%. What conclusions can you draw? 6. What are the key assumptions of the Lewis model that give rise to its conclusions? How would the theory’s conclusions differ if these assumptions do not hold?...
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