The major issue that creates a lot of hurdles for students is the lack of understanding of theories, their assertive points and how each of these present the demands of the economy. What is more problematic is that none of these theories provide a correct answer, rather they leave the whole contexts in an open ended manner.
- With New Growth Theory greater interest is placed on how well the human resources can be dealt with and what is their role in regular economy. It is also important to note to what level innovation is acceptable so that it does not start off the usual diminishing returns rate. However, in comparison to the original classical theory or the neoclassical version, it is not something that can be given prevalence.
- Neoclassical theory states that within a certain limited resources, human population has to be kept in tune. What it rather concentrates on is how after a certain point of time, accumulation of physical capital does not help dealing with the scenario in any manner. Rather, it results in diminishing returns to capital, and to continue with this process, it is important to ensure that technological advancement has to be made and only then this accumulation will get a proper format. What has to be done is people have to become more creative in regards to usage of scarce resources to ensure that there is no wastage in regards to these.
- Classical theory stares that since earth has limited resources, they have to be used in the best possible manner. What is important is consistent technological advancements has to be made so that diminishing returns rate is not reached by students. Once this rate is reached, to bring back the economy into its normal zone can become quite difficult.
Hence, a detailed analysis of all these theories has to be taken into consideration and applied accordingly to get ideal results.
Links of Previous Main Topic:-
- Definition of Economics
- Economic Problem
- Market Equilibrium
- Employment and Unemployment
- Economic Growth Macroeconomics
- The Basics of Economic Growth
- The Magic of Sustained Growth
- Economic Growth Trends
- How Potential GDP Grows
- Why Labor Productivity Grows
- Preconditions for Labor Productivity Growth
- Physical Capital Growth
- Human Capital Growth
- Technological Advances
- Growth Theories Evidence and Policies
- Classical Growth Theory
- Neoclassical Growth Theory
- New Growth Theory
- New Growth Theory Versus Malthusian Theory
Links of Next Macroeconomics Topics:-