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14 October, 13:35

Suppose the growth of production in Country A follows Harrod-Domar Model. Country A has 100 people (labors) in Year 1. The capital K in Year 1 is 60. The incremental capital-output ratio v = 5 and the constant savings rate s = 0.1. There is no depreciation in capital. What is the growth rate of aggregate productions in Year 1?

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  1. 14 October, 15:48
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    2%

    Explanation:

    Given that,

    Number of people in year 1 = 100 labors

    Capital K in year 1 = 60

    According to Harrod-Domar model,

    Growth rate in total output:

    = savings rate : capital output ratio

    So, g = s : v

    g = 0.1 : 5

    = 0.02 or 2%

    Thus, growth rate of aggregate productions (or total output) in year 1 is 2%.
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Home » Business » Suppose the growth of production in Country A follows Harrod-Domar Model. Country A has 100 people (labors) in Year 1. The capital K in Year 1 is 60. The incremental capital-output ratio v = 5 and the constant savings rate s = 0.1.
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