In neoclassical growth theory, if the rate of return on capital increases due to a technological advance, then

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In neoclassical growth theory, an increase in the rate of return on capital due to technological advance initially attracts more investment in capital, leading to capital accumulation. However, as capital per worker increases, the marginal product of capital falls, which eventually causes the rate of return on capital to decline, aligning with the theory's prediction of diminishing returns to capital.

In Neoclassical Growth Theory, If the Rate of Return on Capital