Question

explain very briefly and precisely the significance of Harrod-Damar model of economic growth.

Answer 1

1) :-Importance / significanance of Harrod-Domar model of economy growth

•The Harrod-Domar economic growth model stresses the importance of savings and investment as key determinants of growth.

Level of Savings (higher savings enable higher investment)

•it is argued that in developing countries low rates of economic growth and development are linked to low savings.
This creates a viscous cycle of low investment, low output and low savings. To boost economic growth rates, it is necessary to increase savings either domestically or from abroad.

•Increasing capital to developing countries should break the cycle by enabling higher growth which will in turn lead to higher savings.

•It Depends directly on the national net savings rate and inversely on the national capital-output ratio.

•Capital-output ratio (a lower capital output ratio means investment is more efficient and the growth rate will be higher) Increasing productivity of capital.

•. negatively effected by depreciation

•gap per capita reduced by population growth (n)