An assumption of the new growth theory is that

Question

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The new growth theory assumes that the growth rate of productivity depends on people's ability to innovate, which in turn is influenced by factors such as education, population size, and research and development. This is in contrast to the traditional neoclassical growth theory, which assumed that the growth rate of output is determined by technology and the factors of production. Choice A is incorrect because the new growth theory allows for the possibility of increasing wages due to productivity gains. Choice B is incorrect because the new growth theory recognizes the role of deliberate investment in research and development. Choice C is not a direct assumption of the new growth theory, although it does suggest that the productivity of capital depends on the level of investment. Choice E is not an assumption of the new growth theory, but rather a possible consequence of technological progress.

An Assumption of the New Growth Theory Is That