In Neoclassical Growth Theory, If the Rate of Return on Capital

question 75

Multiple Choice

In neoclassical growth theory, if the rate of return on capital increases due to a technological advance, then

• A)the rate of return on capital will eventually decline.
• B)capital per hour of labour will decrease.
• C)real GDP per hour of labour will decrease.
• D)the rate of return on capital will never decline.
• E)population growth will explode.

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Definitions:

Price of Y

This refers to the cost or value assigned to a specific good or service denoted by "Y", which can vary based on market demand, supply, and other economic factors.

Hypothetical Consumer

An idealized representation of a consumer used for theoretical purposes, reflecting average behaviors and responses to market changes.

Utility-Maximizing Combination

A selection of goods and/or services that provides the highest level of satisfaction or utility to a consumer, given their budget constraints.

Total Utility

The total satisfaction or benefit received by consuming a particular quantity of a good or service.