Re: Growth Related Question..!!!!

Posted by MI on May 02, 2013; 1:15pm
URL: http://discussion-forum.276.s1.nabble.com/Growth-Related-Question-tp7580321p7580322.html


I think answer is

a) warranted rate of growth is > than natural rate of growth

warranted rate of growth is related to Harrod-domar model  and is given by

= Saving propensity / Incremental capital-ouput ratio

= 0.14/4 = 0.035 = 3.5%

Natural rate of growth is obtained by solow model assuming all incremental population is employed.

That means Y should increase by 3% (i.e. by the rate of population growth)

Let me know if you find any fallacy.