Author Question: Explain how the new growth theory treats technology differently from the way economists used to ... (Read 34 times)

nramada · **on:** Jun 30, 2018

Explain how the new growth theory treats technology differently from the way economists used to treat technology.

What will be an ideal response?

Question 2

Consider two economies: A and B that are completely similar, except their savings rate. The savings rate in economy A is greater than the savings rate in economy B. Which of the following statements is true?

A) Capital accumulation will be faster in economy B in comparison to economy A.
B) Capital accumulation will be faster in economy A in comparison to economy B.
C) Rate of capital accumulation will be the same in both economies.
D) Growth rate in country B is likely to be higher than the growth rate of country A in the long-run.

shaquita · **Reply #1 on:** Jun 30, 2018

Answer to Question 1

Technology used to be treated as an outside factor of growth that could not be explained itself. The new growth theory includes technology as another factor of production and argues that the greater the reward to technology the greater will be technological advance. Firms engage in research and development activity with the expectations of increasing their profitability.

Answer to Question 2

B