What is the role of profits in the neoclassical growth theory ...

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What is the role of profits in the neoclassical growth theory versus the new growth theory?
 
  What will be an ideal response?

Question 2

One result of a decrease in aggregate demand and no change in aggregate supply is
 
  A) a recession.
  B) an increase in employment levels.
  C) an economic expansion.
  D) a rise in the price level.

[daiying98]

Answer to Question 1

Profits play essentially no role in the neoclassical growth theory. In the new growth theory, they are key because it is based on the idea that technological change results from the choices that people make in the pursuit of profit. Discoveries result from people's choices, such as whether to look for something new and, if so, how intensively to look. Profit affects these choices. A new discovery brings the discovered high profits but eventually competitors emerge and the above-average profit is competed away.

Answer to Question 2

A

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Thank you

[daiying98]

No problemo