The Harrod - Domar model is a classical economic growth model that explains the relationship between economic growth, capital accumulations, and savings. The model develop by economists Roy Harrod and Evsey Domar in the 1930s and 1940s.

Key Equations and Concepts

The basic form of the Harrod-Domar model can be expressed with the following equations:

1. Output (GDP) Growth Rate:

g = s/k

where:

• g is the growth rate of output (GDP).
• s is the savings rate (the fraction of national income saved).
• k is the capital-output ratio (the amount of capital needed to produce one unit of output).

1. Investment:

Investment (I) is equal to savings (S), where:

 I = S = s⋅Y

• Y is the total output (GDP).

1. Capital Accumulation:

The change in capital stock (ΔK) is equal to investment:

ΔK = IÏ