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    Question

    COR = 5:1, Savings rate = 12.5%, Population growth rate

    = 2.5%. Find growth rate of output.
    A 2.5% Correct Answer Incorrect Answer
    B 5% Correct Answer Incorrect Answer
    C 3% Correct Answer Incorrect Answer
    D 4% Correct Answer Incorrect Answer
    E 7% Correct Answer Incorrect Answer

    Solution

    According to Harrod-Domar Model, Gy = s. σ Where σ is output-capital ratio, s = MPS Gy = growth rate of output So, Gy = 12.5 (1/5) = 2.5%

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