Answer-first summary for fast verification
Answer: endogenous growth theory.
## Explanation This scenario describes **endogenous growth theory**, which: - **Emphasizes technological progress** as endogenous to the economic system - Suggests that **R&D investments** can lead to **permanently higher growth rates** - Views knowledge and innovation as drivers of sustained economic growth - Justifies government policies to stimulate private R&D investment **Why not the other options:** - **Classical theory**: Predicts that growth is temporary and ultimately limited by population growth - **Neoclassical theory**: Suggests growth eventually slows to an exogenous rate determined by technology **Key insight**: Endogenous growth theory is unique in suggesting that policy interventions (like R&D incentives) can permanently increase a country's long-term growth rate through knowledge accumulation.
Author: LeetQuiz Editorial Team
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The government of a developing country offers large tax breaks to private companies to invest in research and development. The government assumes that this will generate a permanently higher economic growth rate. This assumption is a characteristic of the:
A
classical growth theory.
B
neoclassical growth theory.
C
endogenous growth theory.
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