jnu q pls help!

[vandita24x7]

the long run rate of growth of gdp is 5% at full employment, investment rate is 20% and rate of growth of labour force is 2% then capital output ratio is

a. 2%

b. 5%

c. 7%

d. 10%

pls provide the complete solving here if u get any option above.

[sakshi]

i m geting 2.8 as answer so possible answer may be a) 2%
i m not sure

[vandita24x7]

m gettin 4. wat was ur approach?

[sakshi]

investment rate = saving rate at equi= .20
g+n= .05+ .02 = .07
.20/.07= 2.8
what was urs...???

[vandita24x7]

acc to formula of warranted growth rate..
growth rate(g)=S/c, whr S=s/y and c is capital output ratio. goin wid this and since I=s so,
c=S/g
c=.2/.05=4

what formula u applied?

[Naam me kya rakha hai!!!]

 if We use harrod domar

deltaY/Y=(s/c-o ratio)-(population-dep-efficiency)

Assuming in long run, change in income will be "0"(in question,they are saying long run growth will be 5%)

0=(20/c-o)-2

therefore c-o =10%

is it right??

[sakshi]

vandita i used s/capital ouptput ratio=g +n
I=S
iy=sy
investment rate is i=s saving rate...
so answer is 2.8%
i am dobutful about dis answer as it is not in option...
naam me kya rakha h.... ur approach is not clear to me

[Ayushya Kaul]

I think what you've done is right.
Since the g in the Harrod Domar equations is g* i.e rate of growth PER CAPITA, which will be zero in the long run.