Because of population growth,Ghana's GNP must grow by 1.5 percent per year just to avoid a decline in average standards of living.With an ICOR of 6.0,achieving this minimum-growth target requires a saving rate of:

Question

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The Incremental Capital-Output Ratio (ICOR) indicates the amount of investment needed to generate a unit increase in output. To maintain the standard of living with a 1.5% growth in GNP, given an ICOR of 6.0, the required saving rate is calculated as: Required growth rate (1.5%) * ICOR (6.0) = 9%.

Because of Population Growth,Ghana's GNP Must Grow by 1