According to the Harrod-Domar growth model,suppose that the saving rate is 12 percent,the capital-output ratio is 2,and the depreciation rate d is 4 percent,what is the expected long-run growth rate of GDP?

Question

Quizplus · Accepted Answer

The Harrod-Domar growth model states that the long-run growth rate of GDP (g) is equal to the investment rate (s) divided by the capital-output ratio (k), minus the depreciation rate (d). 
Thus, using the given values: 
g = (s/k) - d 
= (0.12/2) - 0.04 
= 0.06 - 0.04 
= 0.02 or 2% 
Therefore, the expected long-run growth rate of GDP is 2%. Thus, the answer is C.

According to the Harrod-Domar Growth Model,suppose That the Saving Rate