Multiple choice

In Harrod -Domar model, if the growth rate of income is 5% and capital-output ratio is 3, then saving rate must be

  1. 5%

  2. 3%

  3. 8%

  4. 15%
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

The Harrod-Domar model states that the growth rate of income (g) equals the saving rate (s) divided by the capital-output ratio (k). Given g = 5% and k = 3, we calculate: s = g × k = 5% × 3 = 15%. This is the minimum saving rate needed to achieve the 5% growth target.

Keep practicing — related questions