Ask Question
10 November, 04:28

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?

+5
Answers (1)
  1. 10 November, 04:34
    0
    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%.
Know the Answer?
Not Sure About the Answer?
Find an answer to your question 👍 “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 ...” in 📗 Business if the answers seem to be not correct or there’s no answer. Try a smart search to find answers to similar questions.
Search for Other Answers