According to New Growth Theory. Save Answer 41. Under the new growth theory, nurturing innovation internally is one of the … B)nonrival. 0 votes. C)knowledge capital is subject to increasing returns. d. … According to the new growth theory a. preventing imports is an important technique that governments can follow to generate greater domestic economic growth. Rather, it depends on the number of people seeking out new innovations or technologies and how hard they are looking for them. First, it views technological progress as a pr oduct of economic activity. Important contributions to the model came from the work done by Solow and by Swan in 1956, who independently developed relatively simple growth models. technology. 2. B)nonrival. C) military spending. b. human capital. Neo-classical-theory – Growth based on supply-side factors such as labour productivity, size of the workforce, factor inputs. Endogenous Growth Theory Romer (1994) explained that the endogenous growth concept emerged in 1980s and according to this concept, economic growth is … C. technology. According to the theory of the production cycle, after the Second World War in Europe has increased demand for manufactured products like those produced in USA. New Growth TheoryNew Growth theory is closely associated with American ecnomist, Paul Romer. The above equation (9) represents the steady growth rate equation of endogenous growth theory. Rather, it extends the latter by introducing endogenous technical progress in growth models. According to new growth theory, which of the following promote economic growth? c. knowledge about how to produce goods and services is an important source of economic growth. Forthcoming in The New Palgrave Dictionary of Economics, 2nd edition, London: Macmillan, 2007. B. the growth of technology is determined outside the economic system and cannot be explained by economic theories. Create your account. Limitations of the Classical Growth Model Ignorance with respect to technology : The classical model of growth ignores the role efficient technical progress could play for the smooth running of an economy. government intervention in the market place. B. government intervention in the market place. According to new growth theory, economic growth is driven by. For example, a large enterprise might allow part of its staff to work on independent, internal projects that may develop into new innovations or companies. C) positive externalities. 40. Question According to new growth theory, the primary source of growth is: entrepreneurship. According to neoclassical growth theory, the fundamental cause of economic growth is technological change, which induces saving and investment that make capital per hour of labor grow the key proposition of new growth theory that makes growth persist is that-- is not subject to diminishing returns Endogenous technological advances drive economic growth. As a result, not only the human capital formation will increase, but increasing returns will also emerge. B)knowledge capital is excludable. According to new growth theory, economic growth is driven by. Knowledge is treated as an asset for growth that is not subject to finite restrictions or diminishing returns like other assets such as capital or real estate. In some ways, the enterprise lets them function like startups being incubated inside the organization. (Points: 2) According to new growth theory, as technology becomes more important to growth, so does a. increasing trade barriers. 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