Modern or "new" theories of long-run economic growth are based on the assumptions that technological change is mainly ________ to an economy and that investment yields ________ marginal returns.

Question

Quizplus · Accepted Answer

Modern or "new" theories of long-run economic growth, such as those proposed by Paul Romer and others, emphasize that technological change is endogenous, meaning it results from the investment in human capital, innovation, and knowledge within the economy. Additionally, these theories suggest that such investments yield increasing marginal returns, contrary to the classical assumption of diminishing returns. This is because investments in knowledge and technology can lead to innovations that benefit not just the investor but the economy as a whole, creating a virtuous cycle of growth.

Modern or "New" Theories of Long-Run Economic Growth Are Based