econ growth stops when real return=target return could someone explain this thanks
NeoClassical Growth Theory is the proposition that real GDP per person grows because technological change induces a level of saving and investment that makes capital per hour of labor grow. Growth ends only if technological change stops. Key assumption is savings (increases the higher the real interest rate). Prosperity persists because there is no classical population growth to induce wage rate to fall.
Neoclassical aka Endogenous Growth Theory: Without technology, no real GDP growth will occur. Tech leads to increased savings & investment, which causes capital per labor hour to grow and real rate of return to fall to target rate. Differs from classical in that pop. growth is NOT related to economic growth, and the mort important economic influence on pop. growth is the opportunity cost to women for entering work force --> wages up, women work, pop. growth slows, however more is spent on health care so the death rate also decreases. Also, the technology growth benefit is shared by all sectors of the economy.
what is and who determines target rate of return?
No CubeMonkey No!!! Neoclassical is NOT THE SAME AS Endogeneous Growth Theory. Endogeneous Growth=New Growth Theory
You’re right! Brain fart. Sorry. Wish I could still edit my post. I even have an acronym for these theories, since I know their definitions in order. Cannot - classical kNow - neoclassical Everything - endogenous
classical - YOU MAKE lot of kids as your income goes up (I hate this proposition, why are we still listening to this stupid ideas)