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Consider country Z located in Latin America. Assume that Z is a closed economy and that Z is characterized by perfectly elastic labour supply and
Consider country "Z" located in Latin America. Assume that "Z" is a closed economy and that "Z" is characterized by perfectly elastic labour supply and by linear technology. In the current year, the national statistics show that the incremental capital-output ratio (ICOR) is 1.9, the capital depreciation rate is 2.2%, and the gross savings rate is 7.6%. Use the Harrod-Domar growth equation to determine the rate of growth. What should the gross savings rate be to double the growth rate?
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