Derive the Harrod-Domar growth equation, starting with K(t+1) = (1 - 6)K(t) + 1(t) where: K(t) = capital stock at time t; I(t) = investment at time t; 6 = depreciation rate for capital. You should also assume the following: savings rate = s = S(t)/Y(t); capital-output ratio = 8 = K(t)/Y(t), where: Y(t) = GDP at time t; S(t) = savings at time t; and GDP growth rate (g) = [Y(t+1)-Y(t)]/Y(t). Express g in terms of s, theta (0), and delta (6).

Derive the Harrod-Domar growth equation, starting with K(t+1) = (1 - 6)K(t) + 1(t) where: K(t) = capital stock at time t; I(t) = investment at time t; 6 = depreciation rate for capital. You should also assume the following: savings rate = s = S(t)/Y(t); capital-output ratio = 8 = K(t)/Y(t), where: Y(t) = GDP at time t; S(t) = savings at time t; and GDP growth rate (g) = [Y(t+1)-Y(t)]/Y(t). Express g in terms of s, theta (0), and delta (6).

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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