1. The propensity to save (s) and the capital output ratio are constant. But are likely to change in the long run.
2. Labour and capital may not be used in fixed proportions since one may be substituted for the other.
3. Fail to consider changes in the general price level
4. Interest rates change to affect investment and yet it is assumed that they do not change
5. Ignore the effect of government programs
6. Neglects entrepreneurial behaviour, which determines the warranted growth rate.
7. Fails to draw a distinction between capital goods and consumer goods.
8. Instability of the models lies in the effect of excess demand or supply on the production decision and not in the effect of growing capital shortage or redundancy on investment decisions.
Zainabdawa answered the question on August 1, 2018 at 08:52
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