Major difference between harrod domar and solow models of growth lies in
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Developed after the Keynesian model of economic growth, Harrod-Domar model aims to tell us the economies rate of growth by telling us in terms of savings and increase in capital. The true essence of this model is based on the assumption that there is actually no valid reason that can be explained naturally for an economy to develop in a balanced fashion. The founders of this theory were Roy F. Harrod and Evsey Domar . The followers of the Classical Economy school of thought, argued for the failure of the Harrod-Domar model because according to them the solution obtained from Harrod-Domar model was unstable and didn’t fixed the solutions. The dialogue between the Harrod-Domar and the Classicalists led to the creation of Solow-Swan model.
In the Harrod-Domar model, employment and income’s analysis were done for long duration of time and thus they considered the investment’s income and capacity. Their model showed that for a capitalist economy to attain a uniform growth the investment rate should be increased at a certain rate. In the Harrod-Domar model accumulation of capital plays a key role to determine the economic growth. The biggest difference between the Keynesian economists theories and Harrod-Domar Model was that the latter considered both sides such as long and short term while the Keynesian only used one side that was the short-term side of the economy. According to Harrod-Domar model, if one has to maintain full employability, the total expenditure by investing must suffice the added output that was developed by the investment. There should be a definite growth in the real national income to make sure that full employability is present which would then lead to steady growth rate. They also said that if we kept omn increasing the annual investment and there was no demand in the market then it would lead to underutilization of capital stock and such a situation is detrimental to growth.
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In the Harrod-Domar model, employment and income’s analysis were done for long duration of time and thus they considered the investment’s income and capacity. Their model showed that for a capitalist economy to attain a uniform growth the investment rate should be increased at a certain rate. In the Harrod-Domar model accumulation of capital plays a key role to determine the economic growth. The biggest difference between the Keynesian economists theories and Harrod-Domar Model was that the latter considered both sides such as long and short term while the Keynesian only used one side that was the short-term side of the economy. According to Harrod-Domar model, if one has to maintain full employability, the total expenditure by investing must suffice the added output that was developed by the investment. There should be a definite growth in the real national income to make sure that full employability is present which would then lead to steady growth rate. They also said that if we kept omn increasing the annual investment and there was no demand in the market then it would lead to underutilization of capital stock and such a situation is detrimental to growth.
hope this helps....
if it helps then please please please mark this as brainliest....
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