Theory |
Description |
Classical Growth |
The Classical Growth Theory postulates that a country’s economic growth will decrease with an increasing population and limited resources. Such a postulation is an implication of the belief of classical growth theory economists who think that a temporary increase in real GDP per person inevitably leads to a population explosion, which would limit a nation’s resources, consequently lowering real GDP. As a result, the country’s economic growth will start to slow. |
Neoclassical Growth |
The Neoclassical Growth Theory is an economic model of growth that outlines how a steady economic growth rate results when three economic forces come into play: labor, capital, and technology. The simplest and most popular version of the Neoclassical Growth Model is the Solow-Swan Growth Model.
The theory postulates that short-term economic equilibrium is a result of varying amounts of labor and capital that play a vital role in the production process. The theory argues that technological change significantly influences the overall functioning of an economy. Neoclassical growth theory outlines the three factors necessary for a growing economy. However, the theory puts emphasis on its claim that temporary, or short-term equilibrium, is different from long-term equilibrium and does not require any of the three factors |
Endogenous Growth |
Endogenous growth theory holds that economic growth is primarily the result of endogenous and not external forces. Endogenous growth theory holds that investment in human capital, innovation, and knowledge are significant contributors to economic growth. |
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