economics hard MCQ

In the context of economic growth models, the 'Harrod-Domar' model emphasizes that the rate of economic growth depends primarily on:

  1. Exogenous technological progress and human capital
  2. The national savings rate and the capital-output ratio
  3. The volume of international trade and foreign exchange reserves
  4. The degree of income inequality and wealth redistribution

Answer: The national savings rate and the capital-output ratio

The Harrod-Domar model, highly influential in early development economics, posits that investment is the key driver of growth. It states that the growth rate equals the savings rate divided by the capital-output ratio (ICOR). Therefore, to grow faster, a developing nation must either increase its domestic savings to fund more investment or improve its capital efficiency (lower the ICOR) through better infrastructure and technology.

Topic Macroeconomics - Growth
Exam Relevance UPSC Prelims, SSC CGL
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