Th4.3: ^^ Savings Gap Flashcards
1
Q
Why do developing countries save less?
A
they have lower incomes
2
Q
What is a savings gap?
A
the difference between actual savings and the level of savings needed to achieve a higher growth rate
3
Q
What does the Harrod-Domar model suggest?
A
savings provide the funds which are borrowed for investment purposes and that growth rates depend on the level of saving and the productivity of investment - economic growth depends on amount of labour and capital
4
Q
However what are the problems with this model?
A
economic growth is not the same as development
investment could be wasted
difficult for individuals to save when they have little income
borrowing from overseas causes problems with debt
