Appended Note 1-1 Relationship between Growth Rate of Business Investment/Capital Investment and Capital Stock Ratio/Expected Growth Rate

If capital stock (K) divided by income (Y) is capital coefficient (K/Y) and the growth rate of K/Y is , then

If desirable growth of capital stock corresponding to expected growth rate

And, if business investment amount is I and disposal rate is , then, growth of capital stock is

From (2) and (3)

This shows that, in a hypothetical neutral situation where the desirable growth of capital coefficient (*) and the disposal rate of capital stock () corresponding to expected growth rate are constant, there is a relationship that forms a hyperbola between the growth rate of I/K and I as of the end of previous term forms. Incidentally, in the Figure 1-1-5, the value for* and is the average of 1971~1990 in the hyperbola with an expected growth rate of 10% and the average of 1991~1999 in the hyperbolas with expected growth rates of 0~4%.