Anonymous In: EconomicsExplain Harrod Domar Model Explain Harrod Domar Model ShareFacebookRelated Questions What is Balance of Payment? Explain in detail Explain the difference between Mercantilist vs Physiocrats How to Earn More Money from YouTube? Some basic but important Tips1 AnswerVotedRecentOldestMehreen 18 Questions 4 Answers 0 Best Answers 251 Points View Profile Mehreen Beginner 2020-11-29T15:33:08+00:00Added an answer on November 29, 2020 at 3:33 pm Harrod-Domar model" a theory of economic growth which suggests there ix no natural tendency for an economy to enjoy blanced growth.the model developed by R.F HAROOD and E.D.DOMAR in 1939. The Harrod.Domar grwth theory iz a very large topic but in shortly we discuss some important point . There r thrRead moreHarrod-Domar model”a theory of economic growth which suggests there ix no natural tendency for an economy to enjoy blanced growth.the model developed by R.F HAROOD and E.D.DOMAR in 1939.The Harrod.Domar grwth theory iz a very large topic but in shortly we discuss some important point . There r three concept of grwth .the first is WARRANTED GROWTH.. The rate of output grwth at which firm believe they have the right amount of capital and don’t feel it necessary to increase or dcrease investment given thier expectation of future demand. The second is the NATURAL RATE OF GROWTH .. Which correspond to the increase in the labor force .if the labor force rises grwth must rise to maintain full emplyment .the third is ACTUAL GROWTH . The change in aggregate output that fianally materializes. These r three cöncept of grwth which examines the problem of grwth in an economy . In the model two prblem r seen to arise in the grwth pattern of an economy .the first is concerns the relationship between actual and natural grwth the second concern the r/s btwen actual nd warranted grwth .the first iz that fctor dterming actual grwth are quite indpndent of the fctor dtermining natural grwth and so there ix no reason that an ecönomy will achieve a lvl of grwth necessry to maintain full emplyment. The natural grwth of rate is dtermine by fctor such as attituds to birth cntrl and tasts of the poplation with respect to family sixe. Actual grwth however ix affcted by the propensity to save and increase in output.The second problem.. As above i say the relation btwen actual and warranted grwth means if enterprenurs expect output to grow they will increase their investment to meet the demand.if the increase in dmand iz forthcoming the aspiration of firm will be met and waranted grwth will be equal to actual grwth no prble arises.however if actual grwth excefs expectation then enterpreneurs will discoves they have not invested as much as they would have wanted .in a response they will increase their investment to the lvl warantet by actual grwth.The conclusion of the harrod domar modl that the ecnomy does nt naturally find a full emplyment stable grwth rate is anlogous to the keynesian .keynes belief that it need nt to find a full emplymen equi levl of output. However the mdl result cn be criticixed becuse the sevrity of assumption built into it .the ist prblem sugst by mdl there ix no reasö fr grwth to equal the lvl necesry to maintain ful emplyment is largly becuse it assumes that price of lbr nd cpital ix fixed they always emplyed equl proportion. However increase lbr suply might drive wages down and lead increase the amount of lbr used rlative cpital. Secndly the mdl assumes that investor are influence by only 1 thng the lvl of output this ix accelration principle which ix betwen waranted and actual grwth which may lead spiralling increse or dcrease in growth. See less0 Share ShareShare on FacebookShare on TwitterShare on WhatsAppYou must login to add an answer. Username or email* Password* Remember Me! Forgot Password?