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Apr 03, 2023
  1. Instructions to students: All questions are compulsory.

    Dictionaries are not allowed.

    TASK: EC3021 Development Economics Assignment

    Question 1

    The government of a poor developing country fears that a political upheaval will occur unless the GDP growth rate is at least 4 percent per annum. The capital-output ratio and the savings rate are projected to be 5.0 and 0.14, respectively.

    a)Which model represents the process of growth using a fixed capital-output ratio? What does the capital-output ratio represent? Discuss the main assumption underlying the production function of this model. (10 marks)

    b)Show that a 4 percent growth target cannot be achieved under these circumstances. (10 marks)

    c)Taking the saving rate as given and a depreciation rate of 10 percent, what capital-output ratio would be required to achieve the 4 percent growth target? (5 marks)

    Question 2

    A fictitious society is composed of only 3 individuals.

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