Gce Model Questions Vol1 2021 Economics Question 45
Practice objective / multiple choice question 45 from the 2021 Gce Model Questions Vol1 Economics examination.
An economy has a capital‑output ratio \(v=3\) and a depreciation rate \(\delta=0.08\) per year. The government wants an annual real GDP growth rate of 5 %. The current domestic savings rate is 15 % of GDP and the country receives foreign aid equal to 2 % of GDP, all of which is invested. Using the Harrod‑Domar relation \(g = s/v - \delta\) (where \(s\) is total investment as a proportion of GDP), how much must the domestic savings rate increase (in percentage points) to meet the growth target?
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About This Question
This is Gce Model Questions Vol1 2021 Economics Question 45. It is one of the objective questions from the 2021 Gce Model Questions Vol1 Economics examination.
Difficulty level: Hard .
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