If ‘s’ is the saving ratio of a country, and ‘k’ is the capital-output ratio, then...
If ‘s’ is the saving ratio of a country, and ‘k’ is the capital-output ratio, then the GDP growth rate is represented by ‘k/s’. True or False. Explain your answer briefly and precisely.
Assume that a country’s GDP must grow by 2% per year. Now, the
country’s capital-output ratio (k) is 6. To achieve the required
growth rate 2%, what must the savings ratio of this country?
Explain briefly.
Homework Answers
Capital Output Ratio explains the relationship between investments and Economic Growth of a Country. In other words, it is the capital needed to produce one unit of Output. So If K is the Capital Output Ratio and s is the saving ratio and let's assume g is the growth
Therefore, G = s/k and hence G = k/s is false.
Here.
G = 2%
K = 6
To remain at 2%, saving Ratio required is, 2% = s/ 6
There s = 12%
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