Question

C) now go back to the case where the savings rate is 20% and the capitaloutput ratio is 4. Imagine, now, that the economy of xanadu suffers violent labor strikes every year, so that whatever the capital stock is in any given year, a quarter of it goes unused because of these labor disputes. If population growth is 2% per year, calculate the rate of per capita income growth in xanadu under this new scenario.

Answer 1

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