neoclassical growth theory

Definition

A theory used in economics that identifies the factors necessary for the growth of an economy. It emphasizes the three factors that influence the growth of an economy, which includes capital, availability of labor and technology. It states that a temporary equilibrium can be achieved when capital size, labor and technology is appropriately adjusted. The theory also states that temporary equilibrium differs from a long-term equilibrium, which does not involve any of the three factors.

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