In the Neoclassical Model of Economic Growth, Technological Development

question 22

Multiple Choice

In the neoclassical model of economic growth, technological development:

• A) is endogenous.
• B) does not affect productivity.
• C) is determined outside the model.
• D) is affected by economic growth.

Analyze the impact of dividend policies and growth rates on stock valuation.

Understand the concept of required rate of return and how it is influenced by market risk factors.

Evaluate the effects of changes in growth rates and required returns on stock prices.

Comprehend the role of dividends, growth, and required returns in stock equilibrium.

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Definitions:

Diminishing Marginal Returns

A principle stating that as investment in a particular area increases, the rate of profit from that investment, after a certain point, cannot continue to increase if other inputs remain constant.

Per-worker Production Function

A mathematical representation of the relationship between output per worker and the amount of capital per worker, along with technology.

Capital

Financial assets or the financial value of assets, such as cash and securities, used to fund a business or generate wealth.

Diminishing Marginal Returns

The principle that as additional units of a factor of production are added to a fixed amount of other factors, the increase in output will eventually decrease.