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Output Y Y. Y Potential output Required Investment Savings actual Investment K* K Capital K Suppose the government of a low-income nation with very little
Output Y Y. Y Potential output Required Investment Savings actual Investment K* K Capital K Suppose the government of a low-income nation with very little starting capital wishes to achieve a real GDP growth rate of 10% next year. How much new capital (K) would need to be accumulated to reach this target growth rate of 10%? Assume there is zero growth due to TFP increases; and capital is represented by "K" formula provided below and treat wishes to achieve a real GDP growth rate of 10% next year. How much new capital (K) would need to be accumulated to reach this target growth rate of 10%? Assume there is zero growth due to TFP increases; and capital is represented by "K" and labor is represented by "L" (Hint: Use the formula provided below, and treat shares of GDP from K and L, respectively as whole numbers when solving problem.) GDP growth rate (share of GDP from K x % AK) + (share of GDP from L x % AL) + % ATFP] GDP growth desired 10%; TFP growth-0 share of GDP from K-30%; %AK-? share of GDP from L-70%; and %A L-3% a) Stock of capital would need to increase by 33.33% share of GDP from L= 70%; and %A L = 3% a) Stock of capital would need to increase by 33.33% b) Stock of capital would need to increase by 26.33% c) Cannot solve problem based on data provided. d) Stock of capital would need to increase by 2.633%
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