A country's leadership believes that the neoclassical growth theory is correct. The country already has the necessary preconditions for growth, so suggest policy changes the government might enact to help speed economic growth
What will be an ideal response?
The policy changes should encourage technological innovation and capital formation because these are the key engines of growth within the neoclassical growth theory. Hence, the government should encourage research and development, possibly by directly funding research and development. In addition, the government should support policies that increase saving, because an increase in saving will lead to increased investment and hence new capital, some of which will have the new technologies embodied in it.
You might also like to view...
A firm employs 100 workers at a wage rate of $10 per hour, and 50 units of capital at a rate of $21 per hour. The marginal product of labor is 3, and the marginal product of capital is 5. The firm
A) is producing its current output level at the minimum cost. B) could reduce the cost of producing its current output level by employing more capital and less labor. C) could reduce the cost of producing its current output level by employing more labor and less capital. D) could increase its output at no extra cost by employing more capital and less labor. E) Both B and D are true.
A major technological advance would be represented on a production possibilities curve by a(n):
a. movement off the production possibilities curve toward a point outside the curve. b. movement toward the curve from a point inside the curve. c. outward shift of the entire curve. d. movement to the left along the curve to a higher point.
In economics, "National Saving" is calculated by
What will be an ideal response?
Which of the following is a transfer payment?
A. the president's salary B. veterans' benefits C. the NASA budget D. schoolteachers' salaries