Explain Incremental Capital Output Ratio and what are the use of ICOR
Explain Incremental Capital Output Ratio and what are the use of ICOR
Homework Answers
Incremental capital-output ratio shows the relationship between investment and output. How much investment is needed to generate an additional unit of GDP. The higher level of ICOR indicates that the Economy is working efficiently. The low level of ICOR shows that economy has not used the technology appropriately.
Use of ICOR:
- It helps to judge the efficiency level of economy.
- ICOR can be used to further make the economic development policies.
- ICOR is used to predict the potential rise in the GDP of country, or prediction of growth can be made based on the rise in the investment and its outcomes that are reflected on the GDP.
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Explain Incremental Capital Output Ratio and what are
the use of ICOR
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.
What happened to the capital output ratio and capital labour ratio of the USA over the...
What happened to the capital output ratio and capital labour ratio of the USA over the last 20 years, why has this happened? (HINT: Productivity of Capital)
Use the following table to find the steady-state values of the capital-labor ratio and output if the per-worker product...
Use the following table to find the steady-state values of the capital-labor ratio and output if the per-worker production function is yų = 2593. 0.22 0.07 s 8 n A Saving rate Depreciation rate Population growth rate Technology 0.05 k* = Steady-state capital-labor ratio = (Round your response to two decimal places.) y* = Steady-state output = . (Round your response to two decimal places.)
2. Explain the concept of an incremental economic analysis. 3. What economic criterion would you use to choose th...
2. Explain the concept of an incremental economic analysis. 3. What economic criterion would you use to choose the best piece of equipment among three alternatives, each with a different operating cost, capital cost, and equipment life? 4. Do you agree with the statement "Monte-Carlo simulation enables the design engi- neer to eliminate risk in economic analysis"? Please explain your answer. 5. In evaluating a large project, what are the advantages and disadvantages of proba- bilistic analysis?
2. Explain the...
Assume that a country's production function is Y = AK0.3L0.7. The ratio of capital to output...
Assume that a country's production function is Y = AK0.3L0.7. The ratio of capital to output is 4, the growth rate of output is 3 percent, and the useful life of capital is 20 years. 'A' is a technology constant that contributes to GDP (Y). A = 1 a) What is the marginal product of capital in this situation? b) If the economy is in a steady state, what must be the saving rate? c) If the economy decides to...
Explain what happens with capital and output if the economy starts with an initial level of capit...
Explain what happens with capital and output if the economy starts with an initial level of capital that is lower than the steady state level of capital.
I am stuck in this problem, can someone help What is the profntability index ratio for the incremental analysis between...
I am stuck in this problem, can someone help
What is the profntability index ratio for the incremental analysis between the two projects and which project would be chosen if only one of the two projects could be selected Capital 1,500,000 $1,400,000 Investment Project Life 30 30 Annual Benefits $260,000 $240,000 Annual Costs $120,000 $110,000 Salvage Value $90,000 $80,000 7% Discount Rate 7% 1.113,B 1.254,A 1.254,B 1.113,A
What is the profntability index ratio for the incremental analysis between the two...
Use an example to explain a production situation in which labor and capital must be in...
Use an example to explain a production situation in which labor and capital must be in fixed proportion (your example needs to identify the product, specify the capital/labor ratio, draw an isoquant map, and then use the isoquant map to explain). Also, what is the RTS? (rts=return to scale) Why?
Explain the graph in the Solow Model (exogenous growth model) that relates capital intensity and output...
Explain the graph in the Solow Model (exogenous growth model) that relates capital intensity and output per worker. What is the next period’s capital stock in the Solow Model? Explain it.
Explain in what circumstances you should use the Sharpe Ratio and when you should use the...
Explain in what circumstances you should use the Sharpe Ratio and when you should use the Treynor Ratio to compare mutual funds.
Use the following table to find the steady-state values of the capital-labor ratio and output if the per-worker production function is yų = 2593. 0.22 0.07 s 8 n A Saving rate Depreciation rate Population growth rate Technology 0.05 k* = Steady-state capital-labor ratio = (Round your response to two decimal places.) y* = Steady-state output = . (Round your response to two decimal places.)
2. Explain the concept of an incremental economic analysis. 3. What economic criterion would you use to choose the best piece of equipment among three alternatives, each with a different operating cost, capital cost, and equipment life? 4. Do you agree with the statement "Monte-Carlo simulation enables the design engi- neer to eliminate risk in economic analysis"? Please explain your answer. 5. In evaluating a large project, what are the advantages and disadvantages of proba- bilistic analysis?
2. Explain the...
I am stuck in this problem, can someone help
What is the profntability index ratio for the incremental analysis between the two projects and which project would be chosen if only one of the two projects could be selected Capital 1,500,000 $1,400,000 Investment Project Life 30 30 Annual Benefits $260,000 $240,000 Annual Costs $120,000 $110,000 Salvage Value $90,000 $80,000 7% Discount Rate 7% 1.113,B 1.254,A 1.254,B 1.113,A
What is the profntability index ratio for the incremental analysis between the two...
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