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Q.3 which one among the following will not remain unchanged in harrod model? ans warranted rate of growth savings ratio capital-output ratio actual rate of grow
Q.3 Which one among the following will not remain unchanged in Harrod Model? Ans Warranted rate of growth Savings ratio Capital-output ratio Actual rate of growth
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Nidhi taparia Best Answer
So based on what we have studied about the Harrod Domar model, both savings rate and capital output ratio are constant and there is nothing said about the constantcy of Actual and Warranted Rate of Growth. But if we were to figure out which among the two rates of growth will remain unchanged, it should be Warranted Rate of Growth. This is because Warranted growth refers to that growth rate of the economy when it is working at full capacity. It is also known as Full-capacity growth rate. This growth rate is interpreted as the rate of income growth required for full utilisation of a growing stock of capital, so that entrepreneurs would be satisfied with the amount of investment actually made. Warranted growth rate (Gw) is determined by capital-output ratio and saving- income ratio which are both assumed constant.