0 points
Time management is very much important in IIT JAM. The eduncle test series for IIT JAM Mathematical Statistics helped me a lot in this portion. I am very thankful to the test series I bought from eduncle.
Nilanjan Bhowmick AIR 3, CSIR NET (Earth Science)
- UGC NET
- Economics
What is true for Neo-Classical growth model ?
What is true for Neo-Classical growth model ? (i) Rate of interest and profit are flexible (ii) Capital is heterogeneous (iii) Perfect competition prevails (iv) Capital and labour are substitutable Choose the correct answer from the code given below :
Choose Your Answer:
0 Attempts
Submit Now
- 0 Likes
- 1 Comments
- 0 Shares
-
![comment-profile-img]()
>
Do You Want Better RANK in Your Exam?
Start Your Preparations with Eduncle’s FREE Study Material
- Updated Syllabus, Paper Pattern & Full Exam Details
- Sample Theory of Most Important Topic
- Model Test Paper with Detailed Solutions
- Last 5 Years Question Papers & Answers
Sign Up to Download FREE Study Material Worth Rs. 500/-
Eduncle Best Answer
Neo-classical growth model does not assume heterogeneity of capital. At the core of the growth model, there is a neo-classical production function. The neo-classical production function is characterized with diminishing marginal productivity of inputs. In absence of technological progress, it is the diminishing marginal product of capital that chokes off the long-run growth through capital accumulation and the economy moves into the steady state equilibrium in the neo-classical growth model. The production function is one of variable coefficients implying innumerable proportions in which capital and labour can be substituted for each other. Since the starting equation of the neo-classical growth theory is investment equals saving, the theory also assumes the flexibility of the interest rate that adjusts freely to bring saving and investment into balance. Perfect competition prevails in goods and factors market so that competition in the respective market produces a single price for the factors involved, namely a single wage rate, a single rate of interest, commodity price and profit. Wages and prices are assumed to move freely to clear each market.