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Outline the limitations of Harrod - Domar model.

Outline the limitations of Harrod - Domar model.

Answers

John
1. The propensity to save and the capital output ratio are constant but they are likely to change in long run.
2. Labour and capital may not be used in fixed proportions since one may be substituted for the other.
3. The model fails to consider changes in price level.
4. The model ignores the effects of government programs.
5. The model neglects entrepreneurial behaviour which determines warranted growth rate.
6. The model fails to draw the distinction between capital goods and consumer goods.
Jonmhumble answered the question on October 30, 2017 at 19:25

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