If the investment rate of an economy is 24%, capital-output ratio is 4 and the growth rate of…
The implied output growth rate is \(24/4=6\%\). Subtracting population growth gives the usual approximation \(6-1.5=4.5\%\) for per capita income growth. Compounding the…
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If the investment rate of an economy is 24%, capital-output ratio is 4 and the growth rate of population is 1.5%, what would be the approximate growth rate of per capita income ?
Answer and explanation
Correct answer A
The implied output growth rate is . Subtracting population growth gives the usual approximation for per capita income growth. Compounding the rates exactly gives , for which 4.5% is the closest listed value.
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Maharashtra and Goa SET (MH SET)