Question
COR = 5:1, Savings rate = 12.5%, Population growth rate
= 2.5%. Find growth rate of output.Solution
According to Harrod-Domar Model, Gy = s. σ Where σ is output-capital ratio, s = MPS Gy = growth rate of output So, Gy = 12.5 (1/5) = 2.5%
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