Question

Consider the Harrod-Domar model given by the following equations .

S(t) = 0.3 Y(t)

I(t) = Ḱ(t) = 0.7 Ẏ (t)

S(t) = I(t)

a)Write the significance of each variable and constant of the model. 

b) Give the economic interpretation of the model.

c) If Y₀ = 100 m.u., compute the income, the savings and the investment trajectories. 

d) Determine the equilibrium points of these trajectories and analyze their stability.

Answer 1

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