Equilibrium Growth in an International Economy*1
IN recent years Keynesian theory has been extended to the analysis of economic growth by the introduction of a relation between investment and productive capacity to supplement the Keynesian relation between investment and effective demand. Combination of the two relations permits the specification of an equilibrium rate of growth, defined as that rate of growth which maintains full employment of capacity.2 So far, however, except for some rather brief comments by R. F. Harrod,3 the development of this model has been largely confined to a closed economy. It is the purpose of this chapter to extend the model to a two-country international economy, and to deduce certain conclusions about ...
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