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Basic Question 13 of 18
According to the Neoclassical theory, when there is an increase in the growth rate of TFP, the per capita income will:
B. remain the same.
C. decrease.
A. increase.
B. remain the same.
C. decrease.
User Contributed Comments 5
| User | Comment |
|---|---|
| broadex | i dont get this??? |
| 602099361 | Can anyone explain this? |
| daverco | I don't think this can be correct. "long-run growth in income per capita in an economy with an aggregate neoclassical production function must be driven by growth in TFP". http://www.people.hbs.edu/dcomin/def.pdf Unless this is some rare exception... |
| dada | This is the direct quote from the textbook: An increase in the growth rate of TFP reduces the steady state capital-to-labor ratio and output per worker for given levels of labor input and TFP. The answer is correct. There is a difference between increase in growth rate and the growth rate itself. If the TFP is growing at 5% per year, there is NO increase in the growth rate although it is growing! |
| davidt876 | if "the growth rate of TFP" is the numerator of a positive fraction in the equation for "growth rate of output per capita ".. how, can an increase in the growth rate of TFP decrease per capita income/output? |
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Edward Liu
Learning Outcome Statements
compare classical growth theory, neoclassical growth theory, and endogenous growth theory;
explain and evaluate convergence hypotheses;
describe the economic rationale for governments to provide incentives to private investment in technology and knowledge;
CFA® 2025 Level II Curriculum, Volume 1, Module 9.