Capital Output Ratio and Economic Development

Relationship Between Investments and Economic Growth
Anonymous
Capital output ratio is useful for economic planning. Suppose a government targets an economic growth of 6% for next year. The current capital output ratio in this country is 4. This means that in order to realize 6% growth, investments should be increased to 24% (6 x4).
Capital output ratio thus explains the relationship between the level of investment and the corresponding economic growth. There is a simple economic equation that shows thus relationship between investment, capital output ratio and economic growth:
Economic Growth = Savings as a percentage of GDP / Capital Output Ratio
Or
EG = S / V
Here, G is economic growth, S is saving as a percentage of GDP and V is the capital output ratio.

Relationship Between Capital Output Ratio and Economic Development
Anonymous
The Capital Output Ratio reflects how much capital a country must save or a borrow abroad for domestic investment in order to attain a certain rate of economic growth.

Capital-Output Ratio in Underdeveloped Countries
Anonymous
It is agreed that capital-output ratio in underdeveloped countries is generally higher, i.e., the capital is less productive in them than in developed countries. This is so because there is a relative inefficiency of the industries which produce capital goods.