Multiple choice

Assertion (A) : Neo - classical models of growth predict steady state growth. Reason (R) Saving investment equality is assumed.

  1. Both (A) and (R) are true and (R) is the correct reason

  2. Both (A) and (R) are false

  3. Both (A) and (R) arc true, but (R) is not the correct reason

  4. (A) is true, but (R) is false
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Neo-classical growth models predict steady state growth because they assume the saving-investment equality holds in the long run. The steady state occurs when capital per worker becomes constant, and the economy grows at the rate of technological progress. The saving-investment equality is fundamental to this convergence mechanism.

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