Proof of Growth Rates in Harrod-Domar Model

  • Thread starter puertocolon
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In summary, the conversation discusses the basic rules of Y=C+S, S=sY, v=K/Y, and I=ΔK, where Y, S, C, I, and K represent income, consumption, savings, capital stock, and investment. The Harrod-Domar growth model states that the growth rates of income, savings, and investment are equal (s/v). By algebraically analyzing the relationships between these variables, it can be proven that the growth rate of income is also equal to s/v. This can be shown by using the formula ΔY/Y = ΔK/K = s/v, where v is a constant. This method can also be used to derive the formula for ΔC/C.
  • #1
puertocolon
6
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So this is the basic rules:
Y=C+S
S=sY
s= S/Y= ΔS/ΔY
, v= K/Y or Y= K/v
I= ΔK


From this show that:
ΔC/C = s/v
Y,S,C, I, K represent income, consumption, savings, caiptal stock and investment. with s and v as multipliers. I am working off the harod-domar growth models which says that the growth rates of income, savings, investment are equal (s/v).

So algebraically I must also show that consumption growth rate = s/v.



Here's the proof for capital stock growth rate:
ΔK/k= I/K= S/K= (S/Y)/(K/Y)= s/v
 
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  • #2
Can you show growth rate of income = s/v?
 
  • #3
Can you help

No i cannot
 
  • #4
Y= K/v implies ΔY/Y = ΔK/K = s/v. (ΔY/Y = ΔK/K - Δv/v; but Δv = 0 since v is a constant.) Does this help?
 
  • #5
Starting to can explained to me in detail if possible? Then perhaps we can put it in Algebraic correct form?
 
  • #6
I meant to say Can YOU explain in detail >>>>> ( LOL )
 
  • #7
Also i need help solving change of C/ C = s/v i need to prove that
 
  • #8
You are given Y= K/v, where v is a constant. This implies ΔY= ΔK/v. Therefore vΔY= ΔK and vΔY/Y= ΔK/Y. Since Y = K/v, vΔY/Y= vΔK/K and the v's cancel out.

You can use this method to derive ΔC/C.
 
  • #9
Can you or anyone deirive it for me?
 
  • #10
I gave you the formula for ΔY/Y. How do you tie ΔC to ΔY?
 

FAQ: Proof of Growth Rates in Harrod-Domar Model

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