Economics · Theories of Economic Growth
In the Harrod-Domar growth model, instability (the 'razor-edge' equilibrium problem) arises primarily because:
Verified Solution4 OptionsUpdated: October 2026👁️1 View
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- 1The capital-output ratio changes automatically and instantly to maintain equilibrium
- 2The warranted, natural, and actual growth rates rarely coincide in a free-market economy✓
- 3The savings rate is entirely independent of national income levels
- 4The actual growth rate always automatically adjusts to the warranted growth rate
Correct answer
The warranted, natural, and actual growth rates rarely coincide in a free-market economy
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