jnu 2005 q11

[Monika]

for an economy the long run rate of growth of gdp is 5percent per annum at full employment. the investment rate is 20percent and the rate of growth of labor force is 2percent per annum. then capital output ratio is-

a-2
b-5
c-7
d-10

[Monika]

PLZZ HELP :/

[tim]

cn someone pls help wid this questn ?

[sweta]

s/theta= n+g

also change in investment/change in gdp= Icor
but still clueless on how to solve...
 if i use 1st equation then...

ans
:   20/ICOR= 2+5

ie 20/7=ICOR

also it give its full emp... dont noe how to proceed!!

[lovekesh]

y do u think g is 5%

[ritu]

hi lovekesh.....can u pls tell us how it has to be done.....pls pls

[lovekesh]

my method is vague and can bring negative marks.
since long run growth of gdp is 5% and labor growth is 2%. Then technology growth rate will or should be 3%.
investment rate is 20% or saving rate.
s/ratio = n+g+d
n=2
g=3
d= i don't know
ratio is s/ 2+3+x
ratio = 20/5+x
so, at max it can be 4% or less than 4%.
Option has 2% , so ......  (a)

[lovekesh]

sorry, it's a ratio. so no % sign.

[ritu]

hello amit sir.........can u pls confirm that whether lovekesh's method is correct????