In the neoclassical growth theory
A)small differences in the saving rate or population growth cause large variations in per capita income.
B)large differences in the saving rate or population growth rate cause small variations in per capita income.
C)large differences in the saving rate or small differences in population growth cause large variations in per capita income.
D)small differences in the saving rate or large differences in population growth cause large variations in per capita income.

Question

Quizplus · Accepted Answer

In the neoclassical growth theory, large differences in the saving rate or population growth rate cause small variations in per capita income. This is because the model predicts that the economy will converge to a steady state in which per capita income is constant.

In the Neoclassical Growth Theory