New growth theory states that increases in ________ capital will result in ________ at the ________ level.
A)knowledge; increasing returns to scale; firm
B)physical; decreasing returns to scale; firm
C)knowledge; decreasing returns to scale; economy
D)knowledge; increasing returns to scale; economy
E)financial; constant returns to scale; economy

Question

Quizplus · Accepted Answer

New growth theory emphasizes the role of knowledge capital in driving economic growth. An increase in knowledge capital leads to increasing returns to scale at the economy level. This is because knowledge capital is a non-rival and non-excludable good, which means that it can be used by multiple individuals and firms without decreasing its availability for others. This creates positive externalities that benefit the entire economy, leading to increasing returns to scale.

New Growth Theory States That Increases in ________ Capital Will