What is the rate of per capita income growth

Reference no: EM131412135

Assignment Questions -

Q1. Name few limitations of old HDI.

Q2. Pick a country from each of the categories of low income, lower middle income, upper middle income and high income and give the recent data on development indicators of GDP, GNI per capita, Primary school enrollment, and Life Expectancy. (Hint: World Development Indicators in World Bank Website).

Q3. Pick a country from each of the categories of very high HDI, high HDI, medium HDI and low HDI and present the values of HDI for the year 2016. Your answer should include the values of all indicators of HDI. Also, for each country mention a new index that's not part of HDI (Hint: www.hdr.undp.org).

Q4. Based on your answer for Qn no 3, describe on your own words, how the HDI compare across the countries that you presented the data. List few reasons that might explain those differences.

Q5. 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:

Q6) Suppose a country's capital-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?

c. 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.

Q7. Consider two economies X and Y. The per capita income for X and Y are given as $20 and $60 respectively. The growth rates are 5% for X and 2% for Y.

a) In how many years, economy X will catch up with economy Y?

b) Compute the per capita income of X in the year it catches up with economy Y?

c) In the year X catches up with Y, what is its income index? Assume the lowest goalpost to be100 and highest goal post to be 40000.

d) Suppose the values of health and education indices are .7 and .6 respectively, compute X's HDI using the older version of the formula of HDI.

Q8. Suppose the savings rate in an economy is 20% and capital - output ratio (c) is 4. First, using the basic H-D equation, calculate the growth rate.

a) What savings rate should be to get the growth rate( g) up to 8% and 10% per year?

b) Assuming s = .2, what 0 should be to get the g up to the same 8% and 10%? Explain what does a decrease in c mean in economic terms?

c) Suppose now assume the depreciation rate to be 3%. What s should be to keep g at 5%?

d) Now assume rate of population growth to be 2% per year. The savings rate is 20% and capital -output ratio is 4 and depreciation is 1%. What is the rate of per capita income growth? What happens to g, if n is 4% and 5%?

e) What rate of population growth would drive the per capita growth rate to zero?

Reference no: EM131412135

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