Capital Output Ratio and Economic Development

Capital Output Ratio
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Relationship Between Investments and Economic Growth

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
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

The Capital Output Ratio reflects how much capital (...)


Capital-Output Ratio in Underdeveloped Countries

It is agreed that capital-output ratio in underdev (...)


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