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CFA Level 2
Economics

Solow-Swan Model and Diminishing Returns

Medium Economic Growth And Development Growth Theories

In the context of economic growth theories, it is essential to understand the mechanisms that foster long-term economic development. These theories outline various factors that influence growth rates, and among them, the role of technological change is often highlighted. Consider the Solow-Swan growth model, which emphasizes the contributions of physical capital, labor, and technological advancement. When examining the sustainability of growth due to technological progress, which of the following options best describes the concept associated with diminishing returns in the model?

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