Harrod

The HarrodDomar model is used in development economics to beg off an economys egression rate in terms of the aim of saving and productivity of crown. It suggests that there is no pictorial fence for an economy to have balanced increment. The model was developed singly by Sir Roy F. Harrod in 1939 and Evsey Domar in 1946. The HarrodDomar model was the precursor to the exogenic growth model. concepts as follows: Natural Rate of Growth Warranted Growth Actual Growth The natural rate of growth refers to the rate of expansion of a job force, as a larger labor force implies higher(prenominal) aggregate output. Warranted growth refers to the output growth rate. Actual growth gives the positive change of the aggregate output. The Harrod-Domar model tries to address two enigmas that have the possibility of occurring in the economy. The first problem deals with the kinship between the natural growth rate and real growth rate. The natural growth rate is determined by the factors alike culture, birth rate or general tastes while the craving to consume or save affects the actual growth rate. The problem is that, given population growth, it is not certain that the economy depart achieve enough output growth to support sum of money employment. The Harrod-Domar model also addresses the problem of the relationship between warranted and actual growth. When it is expected that there will be growth in output, investments also need to be increased.

But problems occur when the actual growth fails to meet the expectations of the warranted growth. |Implications of Harrod-Domar Model | Economic growth requires policies that shape up saving and/or generate technological advances, which lower capital-output ratio. In summation, the savings rate times the marginal product of capital minus the depreciation rate equals the output growth rate. change magnitude the... If you want to get a full essay, order it on our website: Orderessay

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