1. Suppose that the country of Xandu saves 20% of its income and has a capital-output ratio of 4.

1. Using the H-D model, calculate the rate of growth of total GNP in Xanadu.
2. If population growth were 3% per year and Xandu wanted to achieve a growth rate per capita of 4% per year, what should its savings rate have to be to get this growth rate?
3. Now go back to the case where the savings rate is 20% and the capital-output ratio to 4. İmagine, now, that the economy of Xandu suffers violent labor strikes every year so that whatever the capital stock is in any given year, a quarter of it goes unused because of those labor disputes. If population growth is 2% per year, calculate the rate of per capita income growth in Xandu under this new scenario.

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Answer Gross Domestic Product I The sum total of ... View the full answer