The Neoclassical Model of Economic Growth Suggests That

question 55

Multiple Choice

The neoclassical model of economic growth suggests that:

• A) growth rates between rich and poor countries will converge.
• B) rich countries will get richer and poor countries will get poorer.
• C) in equilibrium, the quantity of capital will be greater than the quantity of labour.
• D) higher savings will lead to economic growth in the long run.

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Definitions:

Cost of Debt Capital

The effective rate that a company pays on its current debt, which can be measured as the after-tax rate of return to lenders or creditors.

Creditors Demand

The situation in which creditors request or require payment of money owed to them by the company.

New Borrowings

Funds that a company or government secures by entering into a new loan agreement.

Coupon Rates

The coupon rate is the annual interest rate paid on a bond, expressed as a percentage of the face value.