In the neoclassical growth theory, economic growth eventually stops after a technological advance when

Question

Quizplus · Accepted Answer

According to the neoclassical growth theory, after a technological advance, the increase in capital stock leads to a fall in the return on capital, which weakens the incentive to invest. This results in a decrease in the rate of economic growth until it eventually stops. Therefore, option A is the correct answer. Option B is incorrect because the replication of knowledge capital can lead to further technological advances and sustained economic growth. Option C and E are also incorrect as they do not directly relate to the effects of a technological advance on economic growth. Option D is also incorrect as an increase in the real wage rate can lead to higher productivity and economic growth.

In the Neoclassical Growth Theory, Economic Growth Eventually Stops After