Outline the conclusions and criticisms of the Harrod-Domar growth model. According to the Harrod-Domar model, an economy increases the proportion of new income that it saves from 10% to 20% and it improves the efficiency of new investment so that each dollar of new output requires only two dollars of equipment rather than three, what happens to the equilibrium growth rate.

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Conclusions of the HarrodDomar Growth Model Savings and Investment The model emphasizes the importance of savings and investment in driving economic growth Higher savings rates lead to increased inves... View the full answer