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Question 4 [15 Marks, Total) Practical Application Harrod-Domar Growth Model Consider a poor developing country that fears domestic unrest will occur unless the growth rate
Question 4 [15 Marks, Total) Practical Application Harrod-Domar Growth Model Consider a poor developing country that fears domestic unrest will occur unless the growth rate of the economy is at least 4%. a) If the projected [COR (k) is equal to 3 and the saving rate [5) is equal to 20%, is this growth rate possible, based on the Harrod-Domar equation? Assume a depreciation rate (d) of 3%. (5 Marks) b) Widi the savings and depreciation rates as given, what [COR would be required to achieve a 4% growth target? [5 Marks) c) What type of changes in economic conditions would be needed to alter the [COR to achieve the stated growth target? [5 Marks)
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