Beruflich Dokumente
Kultur Dokumente
Basic Assumptions:
o the neoclassical growth model describes an
economy in which a single homogeneous output is
produced by two types of inputs- capital and labor.
o The economy is always competitive and always
operates at full employment output.
Capital Deepening
The process by which the quantity of capital per
worker increases over time .
Capital deepening occurs when the stock of
capital grows more rapidly than the labor force.
In the absence of technological change, capital
deepening will produce a growth of output per
worker, of the marginal product of labor, and of
real wages; it also will lead to diminishing returns
capital and therefore to a decline in the rate of
return on capital.