Why have development economists emphasized the importance of (a) the proportion of national income that is...

Why have development economists emphasized the importance of (a) the proportion of national income that is saved and (b) the rate of growth of the population (or labor force)? Illustrate your ideas with discussion of the Harrod–Domar or Cobb–Douglas economic growth models. Also draw on empirical evidence about savings proportions, as presented on the textbook.

Solutions

Expert Solution

The proportion of the income saved plays an important role in determination the economic growth rate of a nation. Considering Harrod Domar model, economic growth rate of a nation = Savings rate / ( Capital Output ratio of a nation). Thus, increase in the savings rate leads to increase in the economic growth of a nation. Also in the case of Solow Model, increase in the savings rate shift the savings curve up which increases the steady state rate of capital and output per capita. Thus, Harrod Domar and Solow both emphasizes on increasing the savings rate of a nation to increase the overall economic growth rate of the nation.

Solow Model states that national output in a nation grows at the rate of population growth rate. Thus, any increase in the rate of population growth rate increases the growth rate of output of a nation.

Considering the case of Chinese economy, it has very high savings rate and thus economic growth rate of the nation is also high. It is one of the fastest growing nations of the world.

Rahul Sunny answered 1 year ago

Next > < Previous

Related Solutions

Economists have emphasized beginning with Adam Smith in 1776, that specialization and division of labor benefit...

Economists have emphasized beginning with Adam Smith in 1776, that specialization and division of labor benefit all participants due to the greater productivity in the manufacture of desired goods than when each attempts to satisfy his own wants through self-sufficient production. Explain the logic of division of labor in doing so in terms of absolute and comparative advantage.

Part II. Legal Counsel During the past eight weeks, we have discussed and emphasized the importance...

Part II. Legal Counsel During the past eight weeks, we have discussed and emphasized the importance of the Clean owners seeking business advice from TLG and the importance of Clean - and every business - seeking legal counsel from an attorney for various aspects of business operations. In Part II, you are to reflect on your experience in consulting with the Clean owners, your research and analysis, and make the following recommendations. A. Evaluate and explain why you recommend that...

Discuss the importance of national income statistics to the government of a country and explain the...

Discuss the importance of national income statistics to the government of a country and explain the distinction between national income at market price and national income at factor cost

Explain any TWO (2) uses of national income accounting to economists and to policy makers.

Why do economists pay more attention to national economies ( for example the U.S or Canadian...

Why do economists pay more attention to national economies ( for example the U.S or Canadian economies ) than the state or provincial economies( such as California or Ontario)

HEALTH INFORMATION TECHNOLOGY: Chapter 4 emphasized the importance of good clinical documentation. For this week’s discussion...

HEALTH INFORMATION TECHNOLOGY: Chapter 4 emphasized the importance of good clinical documentation. For this week’s discussion post use the web to research the clinical documentation improvement (CDI) role in health information management (HIM). Post a brief summary, 200- 250 words, about your article and ask a thought provoking question related to the article. Cite 1-2 internet sources used.

1. Why do economists look at a government’s honesty when they study national wealth? 2. Illustrate...

1. Why do economists look at a government’s honesty when they study national wealth? 2. Illustrate on a supply and demand diagram how price ceilings may distort the market outcome and specify what secondary effects price ceilings can create. 3. Explain what Adam Smith mean when he said the market operates as if an invisible hand is guiding the process.

Roles of entrepreneurship in national development

Entrepreneurship has a great role in National Development and more so economic development. State 4 roles of entrepreneurship in contributing to National Development

1- Why can’t Gross National Income be directly used as a measure of income level?...

1- Why can’t Gross National Income be directly used as a measure of income level? What does the PPP adjustment take into account? Why has it to be per capita? Q_12: Based on the findings above, what conclusions can be drawn about income and health inequality between countries in the world? What is the general relationship between income and health status? Why do you think there is such a relationship? What does the existence of the outliers tell...

“Under national income accounting, why should the income method be equal to the expenditure method? Is...

“Under national income accounting, why should the income method be equal to the expenditure method? Is that always true? Discuss.” (150-200 words) You must first demonstrate your understanding on this: income method = expenditure method Next, you have to discuss if income is always equal to expenditure, or not. Give Real Life example.

Subjects