Then, because of the increase in investment the multiplier takes over again. As growth reaches its peak the accelerator kicks in in reverse, and investment then falls. The interaction of the multiplier and accelerator serves to create some of the cyclical fluctuations. This model is a model of long-term growth and was in fact developed independently by Harrod and Domar around the same time. The model tends to show that there will be no natural tendency for the economy to have a balanced rate of growth.
Growth is split into different types and analysed accordingly.
The overall conclusion of the model is that the economy does not naturally find a full-employment equilibrium. This is very similar to the Keynesian belief and is perhaps the main reason why we are considering Harrod as a Keynesian. The policy implication of the conclusion is that the government has to intervene to try to manage the level of output with its policies.