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    Question

    According to the neoclassical growth model, which of the following statements is false ?

    A If the population continually grows, while everything else stays the same, then living standards will be lower than they would be if the population was constant. Correct Answer Incorrect Answer
    B If people save and invest a higher proportion of their incomes, while everything else stays the same, then there will be sustained growth. Correct Answer Incorrect Answer
    C If people save and invest a higher proportion of their incomes, while everything else stays the same, living standards could fall. Correct Answer Incorrect Answer
    D A new technology that makes workers more productive, while everything else stays the same, may not lead to sustained growth. Correct Answer Incorrect Answer

    Solution

    Neoclassical growth theory is an economic theory that outlines how a steadyeconomic growth rateresults from a combination of three driving forces—labor, capital, and technology. Saving and investment is not the driving factor in neoclassical growth model.

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