Question

The traditional neoclassical growth theories assert that the output growth results from:
• [A.] Increase in labour quantity
• [B.] Decrease in labour quality
• [C.] Increase in capital
• [D.] Improvement in technology Choose the correct answer from the options given below:

• A. A, C and D only
• B. A, B and C only
• C. A, B and D only
• D. B, C and D only

Hint:

According to the Solow Growth Model: \[ \boxed{ Y=f(K,L,A) } \] where
• \(K\) = Capital
• \(L\) = Labour
• \(A\) = Technology Economic growth occurs through increases in these productive factors.

Answer 1

The Correct Option is A

Concept: The Neoclassical Growth Theory, primarily developed by Robert Solow and Trevor Swan, explains that long-run economic growth is determined by the accumulation of production factors and technological progress. According to the theory, output increases due to:
• Growth in labour force.
• Increase in capital stock.
• Technological progress. Improvement in labour quality (human capital) also contributes positively, whereas a decrease in labour quality would reduce productivity.

Step 1: Examine each statement.
• [(A)] Increase in labour quantity increases productive capacity. Correct.
• [(B)] Decrease in labour quality lowers productivity and output. Hence, it is Incorrect.
• [(C)] Increase in capital raises production through capital accumulation. Correct.
• [(D)] Technological improvement increases productivity and long-run growth. Correct. Thus, the correct combination is \[ \boxed{A,\;C\;\text{and}\;D} \] Hence, \[ \boxed{\text{Correct Answer}=(A)} \]