What is the main shortcoming of the neoclassical growth model and how does the new growth theory address this shortcoming?

What will be an ideal response?

One difficulty with the neoclassical model is that it predicts all nations will converge to the same level of per capita income. The new growth theory is based on the idea that technological change results from the choices that people make in the pursuit of profit. So if people in different nations face different incentives to innovate, technological progress and hence economic growth can differ among nations.

Economics

You might also like to view...

Households' expenditure on goods and services are sources of revenue for the firms

a. True b. False Indicate whether the statement is true or false

Economics

If speculation is that a recession is around the corner, which means that our future incomes will most likely fall, then the effect of all this on the economy now will be

a. an upward movement along the AD curve b. a downward movement along the AD curve c. the AD curve shift to the left d. the AD curve shift to the right e. the AS curve shift to the right

Economics