Compare and contrast Harrod Growth Model and Domar Growth Model.
What are the simiralities
and differences between the two models.
Similarities:
1. Both models focus on the relationship between savings, investment, and overall economic growth.
2. Both models were developed in the mid-20th century as a way to explain the dynamics of economic growth.
3. Both models assume that there is a stable relationship between savings and investment in the economy.
Differences:
1. The Harrod Growth Model focuses on the idea that economic growth is determined by the level of aggregate demand, while the Domar Growth Model focuses on the relationship between investment and capital accumulation.
2. The Harrod Growth Model emphasizes the importance of maintaining a balance between saving and investment to achieve stable economic growth, while the Domar Growth Model highlights the role of investment in determining the rate of economic growth.
3. The Harrod Growth Model suggests that fluctuations in the level of investment can lead to instability in the economy, while the Domar Growth Model focuses on the importance of maintaining a stable rate of investment to achieve sustainable economic growth.
In summary, while both the Harrod Growth Model and the Domar Growth Model share some similarities in their focus on the relationship between savings, investment, and economic growth, they differ in their emphasis on different factors that drive economic growth and their implications for economic stability.