Essay
Assume a closed economy,perfectly elastic labor supply,and linear technology.Suppose the incremental capital-output ratio (ICOR)is 3,the depreciation rate is 3%,and the gross savings rate is 10%.Use the Harrod-Domar growth equation to determine the rate of growth.What would the gross savings rate have to be to achieve 5% growth? Assuming a perfectly elastic labor supply,state one criticism of this model from an exogenous growth theory viewpoint and another criticism of this model from an endogenous growth theory viewpoint.
Correct Answer:
Verified
Correct Answer:
Verified
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