# Calculating Saving Rate of a Country using Harrod Domar Equation

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**Question**

- Suppose a country’s real GDP per capita (PPP) grew at an average annual rate of 2.00% from 1960 through 1996, increasing from $769 to $1,546. Assuming the country’s GDP per capita continues growing at this average rate from 1996 through 2046, what will be the country’s real GDP per capita equal in 2046?

Use Harrod – Domar Model to answer the following question:

- Suppose a country’s capita-output ratio is 2.5.

a. Using the Harrod-Domar growth equation, what saving rate would have been required for this country to achieve an aggregate growth rate of 8 percent per annum?

b. With the same capital output ratio, what growth target could be achieved with a saving rate of 27 percent?

- If there is a large increase in the saving rate, and therefore a large increase in the amount of new capital formation, is the capital output ratio likely to rise, fall or remain the same? Explain.

**Summary**

This question belongs to economics and discusses about calculating a country’s real GDP per capita equal in 2046.

**Word count: NA**