Distinguishing Growth Theories: Solow vs. Endogenous

Medium Economic Growth And Development Growth Theories

In the context of economic growth theories, consider the Solow growth model, which emphasizes the roles of capital accumulation, labor or population growth, and technological progress. According to this model, steady-state economic growth can be achieved through balanced growth of these factors.

In addition to the Solow model, the endogenous growth theory argues that investment in human capital, innovation, and knowledge are key drivers of economic growth. This school of thought posits that policies aimed at enhancing education and technology play crucial roles in sustaining long-term growth rates.

Given this context, which of the following statements correctly distinguishes between the Solow growth model and endogenous growth theory?

The Solow growth model emphasizes short-term fluctuations, while the endogenous growth theory focuses on long-term growth sustained by policy interventions.

The Solow growth model relies primarily on the accumulation of physical capital, while the endogenous growth theory emphasizes the importance of human capital and innovation.

Both theories predict that economies will converge in terms of per capita income in the long run, regardless of their initial conditions.

Hint

Submitted4.0K

Correct3.0K

% Correct76%