Purchase Solution

Harrod-Domar growth model

Not what you're looking for?

Ask Custom Question

Suppose that the country of less developed has a gross savings rate of 20%, a depreciation rate of 3%, and an incremental capital -output ratio (ICOR) of 2.5.
1- Using the Harrod -Domar (or AK) growth model, calculate the implied rate of growth of GNP per capita?
2- if the population growth rate in less developed is 1.5% per year, what is the implied rate of growth of GNP per capita?
3-How much would the rate of savings have to increase to raise the growth rate of total GNP to 9%?
4- Suppose that one -sixth of all investment is completely wasted by incompetent bureaucrats. Returning to the original numbers, what is the implied growth rate of total GNP?

Purchase this Solution

Solution Summary

The use of the Harrod-Domar growth model determine the growth rate of GNP as other variables change.

Solution Preview

1. The Harrod-Domar model equation gives us: g = s/θ-d, where g is the aggregate growth rate, s is the rate of savings, d is depreciation, and θ is the capital-output ratio. Here s = 20%, or 1/5, and ...

Purchase this Solution


Free BrainMass Quizzes
Economic Issues and Concepts

This quiz provides a review of the basic microeconomic concepts. Students can test their understanding of major economic issues.

Basics of Economics

Quiz will help you to review some basics of microeconomics and macroeconomics which are often not understood.

Economics, Basic Concepts, Demand-Supply-Equilibrium

The quiz tests the basic concepts of demand, supply, and equilibrium in a free market.

Elementary Microeconomics

This quiz reviews the basic concept of supply and demand analysis.

Pricing Strategies

Discussion about various pricing techniques of profit-seeking firms.