Consider the Harrod-Domar relationship for an economy: g = (s/v)- d
Assume that the depreciation rate is 0.If the saving rate is 24 percent,the ICOR is 3,and the depreciation rate is 5 percent,the economy can be expected to grow:

Question

Quizplus · Accepted Answer

Using the Harrod-Domar relationship, we have g = (s/v)- d, where 
g = growth rate of the economy
s = saving rate 
v = ICOR (incremental capital-output ratio)
d = depreciation rate

Substituting the given values, we get: 
g = (0.24/3) - 0.05 
g = 0.08 - 0.05 
g = 0.03 or 3%

Therefore, the expected growth rate of the economy is 3%. The correct choice is C.

Consider the Harrod-Domar Relationship for an Economy: G = (S/v)-