Harrod-Domar Growth Model

The Harrod-Domar growth model is an early post-Keynesian model of economic growth that suggests the growth rate of an economy is directly related to the level of savings and inversely proportional to the capital output ratio. The formula posits that a higher savings rate or a lower capital output ratio leads to higher growth. The growthRate is the economy's expected growth rate, savingsRate is the proportion of income that is saved rather than consumed, and capitalOutputRatio is the amount of capital needed to produce one unit of output. It is used widely in development economics when considering the necessity of saving for investment to achieve economic growth. Practical applications include policy analysis and forecasting in emerging markets.