The Harrod-Domar model
Growth rates
1) China’s GDP increased from $997.5 billion in 1999 to $1,076.9 billion in 2000. Calculate the growth rate of China’s GDP in 2000 (this data is from http://www.worldbank.org).
2) India’s real GDP per capita (PPP) grew at an average annual rate of 2.00% from 1960 through 1996, increasing from $769 to $1,546. Assuming India’s GDP per capita continues growing at this average rate from 1996 through 2046, what will India’s real GDP per capita equal in 2046?
3) China’s real GDP per capita (PPP, 1985 constant prices) increased from $564 in 1960 to $2,374 in 1996. Calculate the average annual growth rate of China’s real GDP per capita over the period 1960-1996.
The Harrod-Domar model
4) From 1980 to 1990, real GDP in India grew by 5.8 percent per annum, while investment averaged 23.1 percent of GDP. What was the ICOR for India between 1980 and 1990?
5) In Indonesia during the 1970s the incremental capital-output ratio (ICOR) averaged 2.50.
a. Using the Harrod-Domar growth equation, what saving rate would have been required for Indonesia to achieve an aggregate growth rate of 8 percent per annum?
b. With the same ICOR, what growth target could be achieved with a saving rate of 27 percent?
c. If there is a large increase in the saving rate, and therefore a large increase in the amount of new capital formation, is the ICOR likely to rise, fall, or remain the same? Explain.
6) The government of a poor developing country fears that a political upheaval will occur unless the growth rate is at least 4 percent per annum. The ICOR and the saving rate are projected to be v = 5.0 and s = 14 percent, respectively.
a. Show that 4 percent growth cannot be achieved under these circumstances.
b. With the saving rate as given, what ICOR would be required to achieve the 4 percent growth target?
Growth Accounting
7) Consider an economy in which the labor force grows by 2.7 percent per annum, while the capital stock grows by 4 percent per annum.
1) China’s GDP increased from $997.5 billion in 1999 to $1,076.9 billion in 2000. Calculate the growth rate of China’s GDP in 2000 (this data is from http://www.worldbank.org).
2) India’s real GDP per capita (PPP) grew at an average annual rate of 2.00% from 1960 through 1996, increasing from $769 to $1,546. Assuming India’s GDP per capita continues growing at this average rate from 1996 through 2046, what will India’s real GDP per capita equal in 2046?
3) China’s real GDP per capita (PPP, 1985 constant prices) increased from $564 in 1960 to $2,374 in 1996. Calculate the average annual growth rate of China’s real GDP per capita over the period 1960-1996.
The Harrod-Domar model
4) From 1980 to 1990, real GDP in India grew by 5.8 percent per annum, while investment averaged 23.1 percent of GDP. What was the ICOR for India between 1980 and 1990?
5) In Indonesia during the 1970s the incremental capital-output ratio (ICOR) averaged 2.50.
a. Using the Harrod-Domar growth equation, what saving rate would have been required for Indonesia to achieve an aggregate growth rate of 8 percent per annum?
b. With the same ICOR, what growth target could be achieved with a saving rate of 27 percent?
c. If there is a large increase in the saving rate, and therefore a large increase in the amount of new capital formation, is the ICOR likely to rise, fall, or remain the same? Explain.
6) The government of a poor developing country fears that a political upheaval will occur unless the growth rate is at least 4 percent per annum. The ICOR and the saving rate are projected to be v = 5.0 and s = 14 percent, respectively.
a. Show that 4 percent growth cannot be achieved under these circumstances.
b. With the saving rate as given, what ICOR would be required to achieve the 4 percent growth target?
Growth Accounting
7) Consider an economy in which the labor force grows by 2.7 percent per annum, while the capital stock grows by 4 percent per annum.