Suppose the saving rate for a low-income country is given.If production becomes less capital intensive,the ICOR will ________ and the growth rate will _________.

Question

Quizplus · Accepted Answer

ICOR (Incremental Capital Output Ratio) is the amount of capital needed to generate an additional unit of output. If production becomes less capital intensive, that means the same amount of output can be produced with less capital. Thus, the ICOR will decrease. A lower ICOR usually leads to higher economic growth rates because it means that capital is being used more efficiently. Therefore, the growth rate will increase.

Suppose the Saving Rate for a Low-Income Country Is Given