How is Harrod-Domar model used in planning?
The Harrod-Domar model is helpful to government for setting target rates for saving required to deliver a specified rate of economic growth.As like an example as suppose k = 4 and target rate of growth is four percent. What is the essential savings ratio? 6 = s/4 which is 16percent.
When the current savings ratio is as around 4 percent in that case cet par, growth will be only one percent, therefore the savings gap to acquire the target 4 percent growth rate is 12 percent.