The Neoclassical growth model assumes:

Question

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The Neoclassical growth model assumes diminishing marginal returns, meaning that each additional unit of capital or labor results in proportionally smaller increases in output. This assumption is critical to the model's prediction that economies converge to a steady-state level of output and consumption per capita.

Answer: B 
 The Neoclassical growth model assumes that population is constant, meaning that there is no growth or decline in the number of individuals in the economy. This assumption allows for a focus on the accumulation of capital and technological progress as the primary drivers of economic growth.

Answer: C 
 The Neoclassical growth model assumes endogenous technological improvement, meaning that technological progress is driven by decisions made by households and firms in response to market incentives. This assumption is critical to the model's prediction that economies can achieve sustained economic growth over the long run.

Answer: D 
 The Neoclassical growth model does not assume that labor is in surplus or any specific labor market condition. Rather, it assumes that factors of production, including labor, can be combined with capital in flexible ways to generate output.

The Neoclassical Growth Model Assumes