Introduction to Economics 2 Deneme Sınavı Sorusu #350032
Which one of the following is about the Harrod Domar Model of economy?
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It emphasizes how positive changes in investment spending causes an increase in an economy’s productive capacity.
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In this model, the term investment refers to a broader concept that not only includes the physical capital accumulation, but also includes research and development (R&D) expenditures and human capital formation.
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It implies that, with no productivity growth, the economy reaches a steady state, with constant capital-labor ratio, output per worker, and consumption per worker. |
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It that an increase in the saving rate has no impact on the long-run rate of economic growth. |
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In this model, economic growth and the growth of income per capita depends on broad investment rather than unexplained technological progress |
The Harrod–Domar model is a simple model that relates an economy’s growth rate to its capital stock and it emphasizes how positive changes in investment spending causes an increase in an economy’s productive capacity. The Harrod-Domar growth rate equation states that the growth rate g of GDP is jointly determined by the savings ratio (s), the capital–output ratio (v) and the depreciation rate of capital stock. The implication and suggestion of this model about the long-run economic growth and development is simply to increase resources devoted to investment.
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