The Key Difference Between the Neoclassical Growth Theory and the New

question 11

Multiple Choice

The key difference between the neoclassical growth theory and the new growth theory is that

• A)capital is not subject to diminishing returns under new growth theory.
• B)capital is subject to diminishing returns under new growth theory.
• C)increases in population drive workers' incomes back down to the subsistence level in neoclassical growth theory.
• D)the pace of technological advances are caused by chance in new growth theory.
• E)labour productivity grows indefinitely in neoclassical growth theory.

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Definitions:

Present Value

The assessed present-day value of money to be received in the future or a pattern of cash inflows, factoring in an established rate of return.

Effective Rate

is the actual interest rate that an investment earns or a loan incurs, including the effects of compounding over a given period.

Present Value

The current worth of a future sum of money or stream of cash flows given a specific rate of return, accounting for the time value of money.

Semiannually

Happens biannually, usually every six months.