Question
Answer based on your understanding of the Harrod-Domar model. In 2012, Ethiopia, a poor developing country, had a GDP (also can be interpreted as total
Answer based on your understanding of the Harrod-Domar model. In 2012, Ethiopia, a poor developing country, had a GDP (also can be interpreted as total income in the economy) of $43,721,414 and total savings of $13,053,183. The capital-output ratio of Ethiopia has been constant for a long time at 3. a) Calculate the savings rate of Ethiopia in 2012. b) According to the Harrod-Domar model, what should be the economic growth in Ethiopia for the next year? c) If Ethiopia wants to have an economic growth of 15% for the next year, what will be its savings gap?
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