Choose the statements concerning neoclassical growth theory that are true. 1. Te
ID: 1164652 • Letter: C
Question
Choose the statements concerning neoclassical growth theory that are true. 1. Technological change results from chance. 2. Neoclassical growth theory is the proposition that real GDP per person grows because technological change induces a level of saving and investment that makes capital per hour of labor grow. 3. Neoclassical growth theory states that growth in real GDP per person can persist indefinitely. 4. Neoclassical growth theory implies that growth rates and income levels per person around the globe will diverge. OA. Statements 3 and 4 are correct O B. Statements 2 and 4 are correct. O C. Statements 1 and 3 are correct. 0 D. Statements 1 and 2 are correct.Explanation / Answer
- B is correct
Growth rates can persist only technology is growing. Technology plays an important role in increasing gdp per person. Growth rates will vary as poor economies will grow faster to get to steady state.
A is correct.
Statement is incorrect as nominal interest rate does not take inflation into account. Real interest rate is an interest rate adjusted for inflation.
- A is correct
Increase in population leads to increase in labor supply which shifts supply of labor rightwards and increase in labor leads overseer in output which creates a movement along the production function.
D is correct
Price and interest rates are negatively related. If price increases interest rate of an asset falls.