Question
Which growth model inspired the use of the
capital-output ratio for development planning?Solution
The Harrod-Domar model inspired the use of the capital-output ratio for development planning. TheHarrod–Domar model is a Keynesian model of economic growth. It is used in development economics to explain an economy's growth rate in terms of the level of saving and of capital. It suggests that there is no natural reason for an economy to have balanced growth.
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