harrod-domar model

• What does the Harrod-Domar model state are key variables in economic growth?

  Investment, saving, and technological change
• How does increased investment affect the PPF/LRAS?

  It pushes out the PPF/LRAS
• What is the effect of introducing new physical capital in the economy?

  It can produce more output than less advanced technology
• What does a high savings ratio provide to banks?

  Funding to lend for capital investment
• What does a low capital-output ratio indicate?

  Physical capital is more productive
• What is the savings gap?

  Difference between actual and needed savings
• What does the savings gap indicate about economic growth?

  It shows the level of savings needed for higher growth