Harrod domer model PPT

Basic details harrod domer model ppt Economics (Production) MBA, M.COM MA., MCA, BA, M.Sc Ag ,

1. Harrod – Domer model Presented by: Siddharth Bharti M.Sc.(Ag.) Agril . Eco. Semester - iv th sem . J.V.College , baraut Department of Agricultural Economics

2. Meaning of Harrod-Domer Model:- The Harrod-Domer Model theories that the rate of Economics growth in Country is defined by the level of Savings and Capital Output-Ratio. Formula = Savings (S) C.R.of growth = Capital OutputRatio (k)

3. Harrod-Domar Model :- The  Harrod – Domar model  is a classical keynesiyan 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 productivity of  capital. It suggests that there is no natural reason for an economy to have balanced growth . The model was developed independently by  Roy F. Harrod in 1939 , and   Evsey Domar   in 1946,  although a similar model had been proposed by  Gustav Cassel in 1924. The Harrod–Domar model was the precursor to the  exogenous growth model.

4. Requirement of Steady Growth:- Harrod – Domer can make Investment in the process of Economics growth, but they emphasize the Nature of the duality of Investment. (I) create the investment income (II) Increase the production capacity of the Economy by capital stock first, the demand effect of Investment and second can be called fulfillment effect, so till the Net Investment continues, the real Income and Production will continue expand.

5. Assumptions :- These are following – 1- Lack of Government Intervention. 2- There is a an initial full Employment balance level of Income. 3- Such models operate in a closed Economy, in where in no any foreign trade. 4- No change in Rates of Interest. 5-The ratio of Capital and Labor to the productive process is constants.

6. Assumptions:- 6 - The average savings trends is equal to the Marginal savings trend. 7 - Savings and Investments belong to the same Year′s Income. 8 - Adjustment between Investment and Productive Capacity building does not seem too long. 9 - The Marginal savings trends is constant.

7. Criticism of Harrod-Domer Model:- The main criticism of the model is the level of assumption, one being that there is no reason for growth to be sufficient to maintain full employment; this is based on the belief that the relative price of labour and capital is fixed, and that they are used in equal proportions. The model explains economic boom and bust by the assumption that investors are only influenced by output (known as the accelerator principle); this is now believed to be correct

8. Limitations of Harrod-Domer Models:- 1- a or s & d is not constant. 2- Labor and capital can not be used in static proportion. 3- Price are not stable/fixed. 4- Interest rates do not stable. 5- objects are not of a kind/same.

9. Conclusion:- professor Kurihara explains that is - “Regardless of these limitations, the Harrod-Domer Growth model is completely independent which is based on fiscal neutrality and has been created to reveal the boundaries of ascending balance for the advanced Economy.

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