Warranted Growth Rate

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Warranted Growth Rate

In the Harrod-Domar model, the growth rate at which an economy will neither expand unsustainably nor go into recession. The warranted growth rate is equal to the savings rate of the economy divided by its capital output ratio. In order to be true, the savings rate is assumed to be a constant proportion of national income and the capital output ratio is derived in part from the investment rate, which is also assumed to be a proportion of the national income.