Save Question 3 1 point d If the investment rate in Indonesi

Save Question 3 (1 point) d If the investment rate in Indonesia is 29 percent of GDP, which of the following combinations is consistent with the Harrod-Domar growth model? O 1) ICOR 15.4; GDP growth rate 7.6 percent per annum 2) ICORs 2.86; GDP growth rate-5.1 percent per annum 3) ICOR = 50.6; GDP growth rate-2.2 percent per annum O4) ICOR 1 percent; GDP growth rate 22 percent per annum Save

Solution

According to the H-D model, we know that Investment = saving = APS x Y. Here I = 29% of GDP which means APS = 0.29. Now we also know that GDP growth rate = APS/ICOR. Hence APS = ICOR x GDP growth rate. The closest option is option D where the product of ICOR and growth rate of GDP is equal to 29%

Hence option D is correct