Jnu 2007 Question

[Rain Man]

Consider a closed controlled economy with unlimited supplier of labor in which the incremental capital output ratio is 4 and the rate of population growth is 1.5 percent per annum . If the economy wants to attain a growth rate of per capita income 6 percent per annum , what must be the savings rate ( in percent ) in the economy ?

a. 24
b. 27.5
c. 30
d. 36

Thanks in advance

[tim]

hey the answer is 30
 
s/thetha = g* + n
s/4 = 6 + 1.5
s = 30.

[Rain Man]

thanks Tim. so is this the harrod-domar equation ?

[tim]

yes it is